Bear Put Ratio Backspread vs Put Option
Put Ratio Backspread
- Bear Put Ratio Backspread
- Put Ratio Backspread Profit, Loss, & Breakeven
- Put Ratio Backspread vs Buying a Put
Both the profit/loss graph at expiration for the Bear Put Ratio Backspread and a Put are given below.
Break-even
The put is superior than the bear put ratio backspread when it comes to the better downside breakeven.
- Bear Put Ratio Backspread = $45.46
- Put = $47.06
Profit
The profit for a bear put ratio backspread is less than a put. The profit at a stock price of $45 is given below :
- Bear Put Ratio Backspread = $46
- Put = $206
Loss
At a stock price of $50 (i.e. stock didn't move in 30 days) the bull call ratio backspread actually makes money, whereas the put loses money:
- Bear Put Ratio Backspread = $46
- Put = -$44
However, at a price of $47.50, the bear put ratio backspread is very inferior to the put.
- Bear Put Ratio Backspread = -$204
- Put = -$44
Like all option strategies, the trader's exact expectations have to be considered when deciding the best strategy to use:
- Direction of stock move
- Magnitude (size) of stock move
- Time frame of stock move