Ratio Spread

Unequal number of long and short options

What is Ratio Spread?

Ratio Spread A strategy involving an unequal number of long and short options at different strikes. Typically selling more options than buying (e.g., buy 1, sell 2), which creates a net credit but adds naked exposure on the extra short options. Ratio spreads profit from moderate moves and benefit from time decay.

Complete Definition

A strategy involving an unequal number of long and short options at different strikes. Typically selling more options than buying (e.g., buy 1, sell 2), which creates a net credit but adds naked exposure on the extra short options. Ratio spreads profit from moderate moves and benefit from time decay.