ApexVol Terminal
Options analytics, live.
Chains, IV rank, expected move and dealer positioning for 5,500+ US stocks and ETFs.
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What is Risk-Reward Ratio?
Risk-Reward Ratio The ratio of the maximum potential loss to the maximum potential profit of a trade. A risk-reward ratio of 1:3 means you risk $1 to potentially make $3. In defined-risk options spreads, this is easily calculated from the spread width and credit received. Lower ratios (less risk per unit of reward) are generally preferred.
Complete definition
The ratio of the maximum potential loss to the maximum potential profit of a trade. A risk-reward ratio of 1:3 means you risk $1 to potentially make $3. In defined-risk options spreads, this is easily calculated from the spread width and credit received. Lower ratios (less risk per unit of reward) are generally preferred.
Example
A $5-wide credit spread collecting $1.50. Risk: $3.50 (width - credit). Reward: $1.50. Risk-reward: 2.33:1.
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ApexVol Terminal
Options analytics, live.
Chains, IV rank, expected move and dealer positioning for 5,500+ US stocks and ETFs.
- Live chains and Greeks
- IV rank and percentile
- Expected move and GEX
- Screener and strategy P&L
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