FDM-ASSIGNMENT

Name-Subhalaxmi Nath
Roll No-18026

Option- Strategy -Put Ratio Spread

It is vertical ratio spread and a 3-legged option strategy that involves buying a number of put options
and selling more put options.

We executed Put Ratio Spread strategy on 18th November 2019 and closed the position on 26th
November 2019. The settlement date was on 28th November 2019. Table 1 gives the details of the
strategy where we buy one at the money put and sell two out of the money put.

Table 1: Put Ratio spread strategy executed on 18th November 2019

Contract Expiry Security Strike Volatility Option Delta Gamma Theta Vega
Entry date price price
date
Buying 18.11.19 28.11.19 11884 11900 7.14 55.85 -0.497 0.003 -1.822 7.847
1 ATM
Put
Selling 18.11.19 28.11.19 11884 11800 7.64 22.50 -0.25 0.002 -1.895 6.246
2 OTM
Put
Contract
Exit
Date
Buying 26.11.19 28.11.19 12064 11900 18.01 12.15 -0.146 0.001 -8.914 2.044
1 ATM
Put
Selling 26.11.19 28.11.19 12064 11800 20.75 5.90 -0.071 0.001 -6.167 1.216
2 OTM
Put
Table 2: Decomposition of Greeks of the Put Ratio Spread

Buying Date Expiry Nifty Strike Close Volatility

Put price
18.11.19 28.11.19 11884 11900 55.85 7.14

18.11.19 28.11.19 12064 11900 6.804 7.14 49.046 Delta

26.11.19 28.11.19 12064 11900 0.081 7.14 6.723 Theta Lot

size
1000
26.11.19 28.11.19 12064 11900 12.151 18.01 -12.07 Vega 43.700 43700

Selling Date Expiry Nifty Strike Close Volatility

Put Price
18.11.19 28.11.19 11884 11800 22.50 7.64
18.11.19 28.11.19 12064 11800 1.857 7.64 20.643 Delta
26.11.19 28.11.19 12064 11800 0.001 7.64 1.856 Theta Lot
size
1000
26.11.19 28.11.19 12064 11800 5.9 20.75 -5.899 Vega 16.6 33200 76900

In Table 2 we observe that our strategy of Put Ratio spread has given us overall profit and individual
profit in both the legs. The underlying NIFTY rose, and volatility increased. Vega went against, but
Delta and Theta was in favour. The effect of Delta was doubly positive in case of Long Put.So,overall
the strong Delta in the long put helped us make profit which was further boosted by profit from
theta and delta in the short leg.