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Ratio Vertical Spread


A delta-neutral options strategy that involves more option short positions than option long positions on the same underlying and in the same expiration month. More specifically, this spread can be established using either all calls or all puts that expire in the same month, and hence it a vertical spread based on buying or selling unequal number of calls or puts.

The ratio of short to long positions is typically in the neighborhood of 2:1 or 3:2. The ratio vertical spread can be used to establish credit volatile positions with unlimited gain potential in one direction. It can also help create positions that profit whatever is the market direction.

The ratio vertical spread comes in two broad types: call ratio vertical spread and put ratio vertical spread.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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