Another name for a bear ratio spread which is a variant on a bear put spread, and a strategy similar to the bull ratio spread in almost all aspects except that in a bear ratio spread, put options are used instead of call options. this strategy involves selling a larger number of out-of-the-money put options and taking a long position in a smaller number of put options.
The short-to-long ratio (i.e., the ratio of short put option to long put options) depends on an investor’s own requirements. This strategy requires no upfront payment and so it is a low-risk strategy. It also profits in case the underlying stays within the range formed by the two strike prices of the short and long options. Other types of a bear ratio spread includes: a bear debit ratio spread, a bear credit ratio spread, and a bear free ratio spread.
The bear ratio spread is also sometimes known as a ratio bear spread or a ratio put spread.
