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  • Ratio PUT Back Spread

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    Rajesh T
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    This strategy involves selling one in-the-money (ITM) put option and buying two out-of-the-money (OTM) put options to construct a put back spread. If the market falls sharply, unlimited profits are possible, while a rise in the market yields limited profits and staying within the range results in limited losses. The position is constructed by selling one ITM put and buying two OTM puts to collect a net credit upfront. Underlying price movement, time decay, and volatility changes determine profitability. An example position sells one 15800 put and buys two 15600 puts.

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    This strategy involves selling one in-the-money (ITM) put option and buying two out-of-the-money (OTM) put options to construct a put back spread. If the market falls sharply, unlimited profits are possible, while a rise in the market yields limited profits and staying within the range results in limited losses. The position is constructed by selling one ITM put and buying two OTM puts to collect a net credit upfront. Underlying price movement, time decay, and volatility changes determine profitability. An example position sells one 15800 put and buys two 15600 puts.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    7 views1 page

    Ratio PUT Back Spread

    Uploaded by

    Rajesh T
    This strategy involves selling one in-the-money (ITM) put option and buying two out-of-the-money (OTM) put options to construct a put back spread. If the market falls sharply, unlimited profits are possible, while a rise in the market yields limited profits and staying within the range results in limited losses. The position is constructed by selling one ITM put and buying two OTM puts to collect a net credit upfront. Underlying price movement, time decay, and volatility changes determine profitability. An example position sells one 15800 put and buys two 15600 puts.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Ratio PUT Back Spread or PUT Back Spread

    If Market makes sharp down move we will get unlimited profits


    and if move upside we can get limited profit and if marked stays
    in the range we will get limited loss.

    - Market Movement: Should fall steep

    - Construction : SELL 1 ITM PUT and BUY 2 OTM PUTS

    - Net Credit should be there (i.e., premium collection should be greater


    than premium paid)

     Underlying NIFTY/BNF price movement is more.


     Time decay is negative since we buy two PUTS.
     Volatility increase is positive and decrease is negative.

    SELL 1 ITM PUT – 15800 PE BUY 2 OTM PUTS-15600 PE

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