Ratio Spread

Description

Buying X options and selling more (Y > X) options.

Trading Logic

Selling OTM options to pay for ITM/ATM options.

Practical Example

Stock at $100. Buy 1 $100C, sell 2 $110C. Net credit: $2.

P/L Curve

Chart Description
  • X-Axis: Stock price at expiration
  • Y-Axis: Expected P/L ($)
  • Green area: Profit; Red area: Loss