What is 'Backspread'

A backspread is s a type of option trading plan in which a trader buys more call or put options than they sell. The backspread trading plan can focus on either call options or put options on a specific underlying investment. A backspread is a complex trading strategy with high risks that is typically only used by advanced traders.

BREAKING DOWN 'Backspread'

A backspread will generally be constructed as either a call backspread or a put backspread. A backspread can also be considered a type of ratio strategy since it will make unequal investments in two types of options. A backspread is the opposite of a frontspread in which a trader sells more options than they buy.

Ratio Spread

The term ratio spread helps a trader to illustrate and understand the ratio of a two-legged trading plan. A standard spread strategy occurs when an investor makes equal investment in both legs of the trading plan with a theoretical ratio of 1:1. Any spread strategy that does not invest equally in two legs of a trading plan is considered a ratio strategy with the ratio calculated based on the weightings of the investments.

Call Backspread

A call backspread or call ratio backspread is constructed by selling (writing) fewer call options on an underlying security than are bought. A trader will typically sell call options and use the proceeds to buy call options on the same security. A call backspread is a bullish trading plan that seeks to gain from a rising underlying security value.

For one example a call backspread could consist of one written call with a low strike price and two bought call options of a higher strike price. In a call backspread all of the options will have the same expiration. (See also: The Basics of the Long Ratio Backspread)

Put Backspread

A put backspread or put ratio backspread is constructed by selling (writing) fewer put options on an underlaying security than are bought. A trader will typically sell put options and use the proceeds to buy put options on the same security. A put backspread is a bearish trading plan that seeks to gain from a falling underlying security value.

For one example, a put backspread could consist of one written put with a high strike price and two bought put options with a lower strike price. Backspreads will use option contracts that have the same expiration. Typically, they are constructed on a 2:1, 3:2 or 3:1 ratio.


A frontspread will deploy a trading plan in which a trader sells more contracts than they buy. Frontspreads are also constructed as either a call frontspread or a put frontspread.

  1. Call Ratio Backspread

    Call ratio backspread strateg refers to the buying and selling ...
  2. Ratio Spread

    A ratio spread is a neutral options strategy in which an investor ...
  3. Buy A Spread

    Buying a spread is an options strategy involving buying and selling ...
  4. Stock Option

    Stock options give the holder the right to buy or sell shares ...
  5. Bull Put Spread

    A bull put spread is an income generating options strategy that ...
  6. Put On A Put

    One of the four types of compound options, this is a put option ...
Related Articles
  1. Trading

    The Basics Of The Long Ratio Backspread

    This option trading strategy allows for unlimited profit potential in a given direction while still providing security.
  2. Trading

    Profiting From Stock Declines: Bear Put Spread Vs. Long Put

    If you're bearish, you should compare the risk/reward characteristics of these two strategies.
  3. Investing

    Why Options Trading Is Not for the Faint of Heart

    Trading options is not easy and should only be done under the guidance of a professional.
  4. Trading

    How to Sell Put Options to Benefit in Any Market

    The sale of a put allows market players to potentially own the underlying security at a future date, at a price below the current market price.
  5. Trading

    Factors That Determine Option Pricing

    A thorough understanding of factors that affect price is essential in options trading.
  6. Trading

    Options Strategies for Your Portfolio to Make Money Regularly

    Discover the option-writing strategies that can deliver consistent income, including the use of put options instead of limit orders, and maximizing premiums.
  7. Trading

    4 Popular Options Strategies for 2016

    Learn how long straddles, long strangles and vertical debit spreads can help you profit from the volatility that stock analysts expect for 2016.
  8. Trading

    Trading Options on Futures Contracts

    Futures contracts are available for all sorts of financial products, from equity indexes to precious metals. Trading options based on futures means buying call or put options based on the direction ...
  9. Trading

    Cut Down Option Risk With Covered Calls

    A good place to start with options is writing calls against shares you already own. Learn the pros and cons of this strategy.
  1. How do traders combine a short put with other positions to hedge?

    Learn how sold puts can be utilized in different types of hedging strategies, and understand some of the more common option ... Read Answer >>
  2. When is a put option considered to be "in the money"?

    Learn about put options, what they are, how these financial derivatives operate and when put options are considered to be ... Read Answer >>
  3. 4 Ways to Trade Options

    Without a good understanding of option trading, terms like "buy to open", "sell to open", "buy to close", and "sell to close" ... Read Answer >>
  4. What happens when a security reaches its strike price?

    Learn more about the moneyness of stock options and what happens when the underlying security's price reaches the option ... Read Answer >>
Hot Definitions
  1. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  2. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  3. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  4. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  5. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  6. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
Trading Center