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Definition of 'Put Ratio Backspread'
An investment strategy that combines options to create a spread which has limited loss potential and a mixed profit potential.
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Investopedia explains 'Put Ratio Backspread'
It's created by combining long and short puts in a ratio such as 2:1 or 3:1.
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This option trading strategy allows for unlimited profit potential in a given direction while still providing security.
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Learn why option spreads offer trading opportunities with limited risk and greater versatility.
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If you're bearish, you should compare the risk/reward characteristics of these two strategies.
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Get to know the essential risk measures and profit/loss guideposts in options strategies.
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Discover the world of options, from primary concepts to how options work and why you might use them.
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Derivatives
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