Online Trading Concepts

Bear Put Ratio Backspread vs Put Option

Put Ratio Backspread

  1. Bear Put Ratio Backspread
  2. Bear Put Ratio Backspread Profit, Loss, & Breakeven
  3. Bear Put Ratio Backspread vs Buying a Put

Both the profit/loss graph at expiration for the Bear Put Ratio Backspread and a Put are given below.

Put Ratio Backspread Profit Loss Graph Put Option profit and loss graph

Break-even

The put is superior than the bear put ratio backspread when it comes to the better downside breakeven.

Profit

The profit for a bear put ratio backspread is less than a put. The profit at a stock price of $45 is given below :

Loss

At a stock price of $50 (i.e. stock did not move in 30 days) the bull call ratio backspread actually makes money, whereas the put loses money:

However, at a price of $47.50, the bear put ratio backspread is very inferior to the put.

Like all option strategies, the trader's exact expectations have to be considered when deciding the best strategy to use: