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Bear Ratio Spread

 Profile Version / Simplified Version / Comprehensive Version


Purpose Of Bear Ratio Spread
1. To Profit On Falling Stocks
2. To Eliminate Upfront Payment
3. To Profit Even When Stock Remains Stagnant


Expectations Of Bear Ratio Spread
Down and Stagnant


Type Of Spread
Naked Option Selling


How To Use Bear Ratio Spread?
Buy At The Money (ATM) Put Options while simultaneously Sell to open enough Out Of The Money (OTM) Put Options to cover the entire cost of the put options bought.

Buy ATM Put + Sell More OTM Put 		Bear Ratio Spread Risk Graph Learn How To Read This Chart

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Profit Potential of Bear Ratio Spread :
The maximum profit potential of a Bear Ratio Spread is attained when the underlying stock closes at the strike price of the short put options. In this respect, the profit potential of a Bear Ratio Spread is limited.


Profit Calculation of Bear Ratio Spread:
Maximum Return = (Total Credit From Short put options + [(Difference in strikes - Price of Long Put) x number of Long Put contracts])

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Risk / Reward of Bear Ratio Spread:
Upside Maximum Profit: Limited

Maximum Loss: Unlimited


Break Even Point of Bear Ratio Spread:
BEP: Strike Price of Short put options - [Maximum Profit / (number of short put options - number of long put options)]


Advantages Of Bear Ratio Spread :

  • A profit can be made even if the underlying stock rises through the use of a Bear Credit Ratio Spread.

  • Much higher profit can be made than a Bear Put Spread when the underlying stock closes at the strike price of the short put options.


    Disadvantages Of Bear Ratio Spread :

  • Some brokers may not allow beginners to execute such a strategy.

  • Margin is required.


    Recommended!Trade Bear Ratio Spreads With Best Options Broker, OptionsXpress!




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