Chapter 06 · Section 6.1

Mechanics of a Put Ratio Backspread

To put on a put ratio backspread, you:

a) sell one of the lower strike and buy two or more of the higher strike.
• b) buy two or more of the lower strike and sell one of the higher strike.
  Yes. You sell the more expensive put and buy two or more of the cheaper put. One usually receives an initial net premium for putting on this spread. The Maximum loss is equal to: High strike price - Low strike price - Initial net premium received. Continue
  c) buy one of the lower strike and sell two or more of the higher strike.
  d) sell two or more of the lower strike and buy one of the higher strike.