Put Ratio Spread

Description

Buying few ATM Puts and selling more OTM Puts.

Trading Logic

Expects a slight decrease in stock price.

Practical Example

Stock at $100. Buy 1 $100P, sell 2 $90P. Net credit: $2.

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P/L Curve

Chart Description
  • X-Axis: Stock price at expiration
  • Y-Axis: Expected P/L ($)
  • Green area: Profit; Red area: Loss