Chapter 06 · Section 6.1

Mechanics of a Ratio Put Spread

To put on a ratio put spread, 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.
• c) buy one of the lower strike and sell two or more of the higher strike.
  No. Answer (c) is weighted very heavily with high-priced short puts. Its profit loss profile would not yield the market neutral profile of the ratio put spread.
  d) sell two or more of the lower strike and buy one of the higher strike.

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