What is Ratio put spread
The Ratio put spread is a compound options trading strategy that consists of a number of long puts with higher strike prices and a larger number of short puts with a lower strike price. The maximum profit is realized when the currency price is at the lower strike price. This combination has two break-even points.
The downside break-even point consists of the difference between the lower strike price and the maximum profit potential, divided by the number of naked puts.
The upside break-even point consists of the difference between the higher strike price and the debit, divided by the number of long calls. The maximum loss is twofold. The maximum downside risk is unlimited. The upside risk is the net premium.
Tags: break even point, downside risk, long calls, options trading strategies, ratio put spread, strike prices, upside risk
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