Compare Strategies
RATIO PUT SPREAD | RATIO CALL WRITE | |
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About Strategy |
Ratio Put Spread Option StrategyThis strategy involves buying ITM Puts and simultaneously selling OTM Puts, double the number of ITM Puts. This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited. |
Ratio Call Write Option StrategyThis strategy involves buying of an underlying asset in the cash/futures market and simultaneously selling ATM Calls double the number of long quantity. This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited.
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RATIO PUT SPREAD Vs RATIO CALL WRITE - Details
RATIO PUT SPREAD | RATIO CALL WRITE | |
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Market View | Neutral | Neutral |
Type (CE/PE) | PE (Put Option) | CE (Call Option) |
Number Of Positions | 3 | 2 |
Strategy Level | Beginners | Beginners |
Reward Profile | Limited | Limited |
Risk Profile | Unlimited | Unlimited |
Breakeven Point | Upper Breakeven Point = Strike Price of Long Put +/- Net Premium Received or Paid, Lower Breakeven Point = Strike Price of Short Puts - (Points of Maximum Profit / Number of Uncovered Puts) | Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit |
RATIO PUT SPREAD Vs RATIO CALL WRITE - When & How to use ?
RATIO PUT SPREAD | RATIO CALL WRITE | |
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Market View | Neutral | Neutral |
When to use? | This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. | This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. |
Action | Buy 1 ITM Put, Sell 2 OTM Puts | Sell 2 ATM Calls |
Breakeven Point | Upper Breakeven Point = Strike Price of Long Put +/- Net Premium Received or Paid, Lower Breakeven Point = Strike Price of Short Puts - (Points of Maximum Profit / Number of Uncovered Puts) | Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit |
RATIO PUT SPREAD Vs RATIO CALL WRITE - Risk & Reward
RATIO PUT SPREAD | RATIO CALL WRITE | |
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Maximum Profit Scenario | Strike Price of Long Put - Strike Price of Short Put + Net Premium Received - Commissions Paid | Net Premium Received - Commissions Paid |
Maximum Loss Scenario | Strike Price of Short - Price of Underlying - Max Profit + Commissions Paid | Price of Underlying - Strike Price of Short Call - Net Premium Received OR Purchase Price of Underlying - Price of Underlying - Net Premium Received + Commissions Paid |
Risk | Unlimited | Unlimited |
Reward | Limited | Limited |
RATIO PUT SPREAD Vs RATIO CALL WRITE - Strategy Pros & Cons
RATIO PUT SPREAD | RATIO CALL WRITE | |
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Similar Strategies | Short Straddle (Sell Straddle), Short Strangle (Sell Strangle) | Variable Ratio Write |
Disadvantage | • Unlimited potential risk. • Limited profit. | • Potential loss is higher than gain. • Limited profit. |
Advantages | • Directional strategy so that there is either no upside or downside risk. • Able to profit even if trader is neutral on the market. • Higher probability of profit. |