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Chapter 6. Leveraged Strategies > Put Ratio Backspread

6.2. Put Ratio Backspread

ProficiencyDirectionVolatilityAsset LegsMax RiskMax RewardStrategy Type
+
    +   
AdvancedBearishHigh• Two Long PutsCappedUncappedCapital Gain
   • Short Put[*]   


[*] Or can be two Short Puts with three Long Puts.

6.2.1. Description

The Put Ratio Backspread is almost the precise opposite of the Call Ratio Backspread. It enables us to make accelerated profits, provided that the stock moves sharply downwards. Increasing volatility is very helpful because we're net long in puts. The worst thing that can happen is that the stock doesn't move at all, and even a sharp move up can be profitable, or at the very least, preferable to no movement at all.


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