Compare Strategies
PUT BACKSPREAD | RATIO PUT WRITE | |
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About Strategy |
Put Backspread Option StrategyIf the trader is bearish on market and bullish in volatility, he will implement this strategy. However the trader can be neutral in nature i.e. indifferent if the market moves in either of the direction, this strategy will make profits, but uptrend will give a capped income than downtrend which will give unlimited returns. |
Ratio Put Write Option StrategyThis strategy is implemented by selling (short) the underlying asset in the cash/futures market. Simultaneously, sell ATM Puts double the number of long quantity. This strategy is used by a trader who in 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. .. |
PUT BACKSPREAD Vs RATIO PUT WRITE - Details
PUT BACKSPREAD | RATIO PUT WRITE | |
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Market View | Bearish | Neutral |
Type (CE/PE) | PE (Put Option) | PE (Put Option) |
Number Of Positions | 2 | 2 |
Strategy Level | Advance | Beginners |
Reward Profile | Max Profit Achieved When Price of Underlying = Strike Price of Short Puts | |
Risk Profile | Loss Occurs When Price of Underlying < Strike Price of Short Put - Net Premium Received OR Price of Underlying > Strike Price of Short Put + Net Premium Received | |
Breakeven Point | Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit |
PUT BACKSPREAD Vs RATIO PUT WRITE - When & How to use ?
PUT BACKSPREAD | RATIO PUT WRITE | |
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Market View | Bearish | Neutral |
When to use? | This strategy is implemented by selling (short) the underlying asset in the cash/futures market. This strategy is used by a trader who in neutral on the market and bearish on the volatility in the near future | |
Action | Sell 2 ATM Puts | |
Breakeven Point | Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit |
PUT BACKSPREAD Vs RATIO PUT WRITE - Risk & Reward
PUT BACKSPREAD | RATIO PUT WRITE | |
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Maximum Profit Scenario | Net Premium Received - Commissions Paid | |
Maximum Loss Scenario | Price of Underlying - Sale Price of Underlying - Net Premium Received OR Strike Price of Short Put - Price of Underlying - Net Premium Received + Commissions Paid | |
Risk | Limited | Unlimited |
Reward | Unlimited | Limited |
PUT BACKSPREAD Vs RATIO PUT WRITE - Strategy Pros & Cons
PUT BACKSPREAD | RATIO PUT WRITE | |
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Similar Strategies | Short Strangle and Short Straddle | |
Disadvantage | • Potential loss is higher than gain. • Limited profit. | |
Advantages |