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Bullish Patterns
Long Calls
Bull Call Spread
Bull Put Spread
Call Backspread
Long Call Ratio Spread
Naked Put
Synthetic Long Stock
The Collar
Covered Calls
Synthetic Long Call
Synthetic Short Put
Covered Straddle
Covered Strangle
Married Put
Protective Put

Bearish Patterns
Long Puts
Bear Put Spread
Bear Call Spread
Put Backspread
Long Put Ratio Spread
Naked Calls
Synthetic Short Stock
Synthetic Short Stock (split strikes)
Covered Put
Protective Call
Synthetic Short Call
Synthetic Long Put

Long Volatility
Long Straddle
Long Strangle
Short Call Butterfly
Short Put Butterfly
Short Iron Butterfly
Short Call Condor
Short Put Condor
Short Iron Condor
Long Guts
Strip
Strap
Short Call Ladder
Short Put Ladder
Long Call Synthetic Straddle
Long Put Synthetic Straddle

Short Volatility
Short Straddle
Short Strangle
Long Call Butterfly
Long Put Butterfly
Long Iron Butterfly
Long Call Condor
Long Put Condor
Long Iron Condor
Short Guts
Long Call Ladder
Long Put Ladder
Call Ratio Spread
Short Call Ratio Spread
Put Ratio Spread
Short Put Ratio Spread
Ratio Call Write
Ratio Put Write
Short Call Synthetic Straddle
Short Put Synthetic Straddle
Variable Ratio Write

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Put Ratio Spread

Risk: limited but very big
Reward: limited

General Description
Entering a put ratio spread entails buying higher strike puts and selling more lower strike puts (same expiration month). It can be thought of as a short put ratio spread, but the ratio of short to long puts is not locked at 2:1.

(draw a strap risk diagram here)

The Thinking
Your research tells you a stock has modest downside potential but will not collapse and will not experience a big expansion in volatility. You enter a bear put spread to profit from such movement and then sell additional puts at the lower strike. This helps finance the trade and results in a more favorable breakeven level.

Example
XYZ is at $57.50. You think the stock could move down a couple points but a big move down is not in the cards. You buy (1) 60 put for $5.00 and then sell (3) 55 puts for $2.00 each. The net credit is $1.00.

Above the highest strike, all puts expire worthless, and your profit or loss is the net credit or net debit; in this case it’s a $1.00 profit.

At $55, your max profitability occurs. The 60 puts will be worth $5 (breakeven), and the 55 puts will expire worthless ($2.00 gain per contract). The net of this is a $6.00 profit.

Below $55, the loss from one of your short puts will be countered by a gain from the long put, and the two remaining short puts will lose you money point-for-point with the underlying. For example, at $50, the 60 put will be worth $10 ($5 gain), and the 55 puts will be worth $5 ($3.00 loss per contract). The net is a $4.00 loss.

The PL chart below graphically shows where this trade will be profitable and at a loss.