Ratio Put Spread option strategy
Ratio Put Spread is Neutral to Mildly bearish Strategy. In this we expect stock to fall gradually near the lower strike Put but not much below it.
Payoff at expiry
Nifty, lot size 65 · Nifty future 22,650 · 6 Oct 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| BUY | ATM Put | 22,650 | 1 | 65 | ₹135.68 |
| SELL | OTM Put | 22,600 | 2 | 130 | ₹111.98 |
How it works
- Buy 1 ATM put at the 22,650 strike for ₹135.68, paying the premium.
- Sell 2 OTM puts at the 22,600 strike for ₹111.98 each, collecting the premium.
- You receive a net ₹5,738 upfront for the position. Your maximum profit is ₹8,988.
Below 22,462 you lose, and the loss grows as Nifty falls.
Above 22,462 you profit, up to ₹8,696.
Set-up: Buy 1 lot ATM Puts and Sell 2 lots OTM Puts with same expiration date.
What happens if Nifty moves
Profit or loss at expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 21,300 | −6% | −₹75,512 |
| 21,950 | −3% | −₹33,262 |
| 22,400 | −1% | −₹4,012 |
| 22,650 | Unchanged | +₹5,738 |
| 22,900 | +1% | +₹5,738 |
| 23,350 | +3% | +₹5,738 |
| 24,000 | +6% | +₹5,738 |
How the Greeks affect it
When to use
When you expect decrease in volatility with stock price remaining range bound.
- Net credit received acts as a cushion for fast downside movement in stock. Profitable when stock remains range bound between two strikes as it has higher theta gain.
Things to watch
- Uncapped risk if stock falls below lower BEP. Managing the trade if stock falls too fast too early. Comparatively complicated trade for intermediate trader.
Ratio Put Spread: questions
What is a Ratio Put Spread strategy?
Ratio Put Spread is Neutral to Mildly bearish Strategy. In this we expect stock to fall gradually near the lower strike Put but not much below it.
When should you use a Ratio Put Spread?
When you expect decrease in volatility with stock price remaining range bound.
How do you set up a Ratio Put Spread?
Buy 1 lot ATM Puts and Sell 2 lots OTM Puts with same expiration date.
What is the maximum profit of a Ratio Put Spread?
Maximum Profit is limited to the difference between the strikes plus( the net credit received) or minus( net debit paid) all multiplied by net long contracts.
What is the maximum loss of a Ratio Put Spread?
Maximum Loss is unlimited below lower breakeven point as you are short in more option then being long.
What is the breakeven of a Ratio Put Spread?
With Nifty at 22,650, the example on this page breaks even at 22,462 at expiry.