Copyright (c) 2009, Commodity Trading School, All Rights Reserved! Option Strategy #10: Put Ratio Back Spread Sell 1 At-The-Money Put, And Buy 2 Or More Out-Of-The-Money Puts Use the Put Ratio Back Spread when you expect the market to make a substantial down move after a period of stagnation or expect a trend reversal.  The objective is to put this trade on as a credit, a free trade or at least, very cheap. If the trade is done as a credit, the profit is limited on the up side to the premium collected.  Profit on the down side is unlimited, as long as the market is below your long puts. Risk is limited to the difference between the short and long option +/- net premium.  If the market expires above the short put, your risk is limited to any premium paid for the spread. At expiration, the maximum loss is realized if the market is trading at the long put trike price.  Being partially right is when the worst case scenario is realized.  In this strategy, you want to be very right, or very wrong. Futures Traders Helping Future Traders