Ratio Spread


Ratio Spread

Constructed with either puts or calls, the strategy consists of buying a certain amount of options and then selling a larger quantity of more out-of-the-money options.

Ratio Spread

An option strategy that involves buying a certain number of option contracts and selling a different number (according to a stated ratio) of options on the same underlying asset with the same expiration date but with a different strike price. One hopes to profit from the change in price of the underlying asset over the life of the options, but a ratio spread is most useful when one does not expect the price to be volatile.