# Put Ratio Backspread

The Put Ratio Backspread strategy involves selling and buying put options in a specific ratio.

The Put Ratio Backspread is an advanced options trading strategy designed for traders who anticipate a significant downward move in the price of an underlying asset. This strategy combines the sale and purchase of put options in a specific ratio, typically selling one put option and buying two (or more) put options with a lower strike price.

**How It Works:**

1. **Sell a Put Option:** The trader sells a put option at a specific strike price.

2.** Buy Put Options:** The trader buys more than one put option (commonly two) at a lower strike price. Both options share the same expiration date.**Potential Profit and Loss:**

- **Maximum Profit:** Unlimited on the downside. The profit increases as the underlying asset's price declines.

- **Maximum Loss:** Limited to the difference between the premiums received and paid. This loss occurs if the underlying closes at the strike price of the purchased put options.**Benefits:**

- **Profit from Large Downward Move:** The strategy can provide substantial profits if the underlying asset experiences a significant decrease.

- **Break-even Point:** Achieved when the underlying asset price equals the higher strike price minus the net cost of the spread.**Drawbacks:**

- **Risk of Small Downward Moves:** If the underlying asset declines moderately, settling between the two strike prices, it can result in a maximum loss.

- **Complexity:** This strategy is more intricate than basic options plays and might be daunting for novices.**Example:**

Suppose NIFTY is trading at ₹20000:

1. Sell 1 ₹20100 put option for a premium of ₹123.

2. Buy 2 ₹19900 put options at a premium of ₹34.25 each.

Net credit: ₹54.25 (Total premium received - Total premium paid)

Breakeven: ₹19573-₹20039

If NIFTY drops significantly below ₹19753, the profit potential is unlimited. If NIFTY remains above ₹20039 or declines slightly, the options expire worthless, resulting in limited profit. However, if NIFTY closes between ₹19753 and ₹20039 at expiration, the trader faces the maximum loss. (difference between the strikes minus/plus credit received/paid)

In summary, the Put Ratio Backspread is tailored for the bearish trader expecting a sharp downward move. While it offers unlimited profit potential on the downside with a defined maximum risk, understanding its risk-return dynamics is crucial.

### Other Strategies

## Iron Condor

A strategy designed to profit from low volatility in the underlying asset, combining a bullish put credit spread and a bearish call credit spread to it.

## Iron Butterfly

This is a strategy which profits from low volatility in the price of the underlying asset while minimizing risk.

## Short Strangle

A short strangle is a non directional trading strategy where an investor sells an (OTM) call option and put option on the same underlying asset simultaneously.

## Short Straddle

A Short straddle is considered neutral or non-directional because it profits from minimal price movement in the underlying asset.

## Put Ratio Backspread

The Put Ratio Backspread strategy involves selling and buying put options in a specific ratio.

## Bear Call Spread

A Bear Call Spread is an options trading strategy that's used when a trader believes the price of an underlying asset will go down, but not significantly.

## Bear Put Spread

A Bear Put Spread is a type of vertical spread strategy used in options trading.

## Long Put

Long Put option is the most basic & simplest strategy. It is recommended or implemented when we expect the underlying asset to show significant downside move.

## Short Call

Short Call strategy is employed in a bearish or neutral market outlook, where the underlying asset's price is expected to remain stable or fall.

## Call Ratio Backspread

The Call Ratio Backspread strategy involves selling and buying call options in a specific ratio.

## Bull Put Spread

A Bull Put Spread is a type of vertical spread strategy used in options trading

## Bull Call Spread

A Bull Call Spread is an options trading strategy that's used when a trader believes the price of an underlying asset will go up, but not significantly.

## Short Put

Short Put strategy is employed in a bullish or neutral market outlook, where the investor believes that the underlying asset's price will remain stable or rise.

## Long Call

Long Call option' is the most basic & simplest strategy. It is recommended or implemented when we expect the underlying asset to show significant upside move.