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Put Ratio Back-Spread

Description

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Sells one put at a higher strike and buys two puts at a lower strike in the same expiration, leaving the position net long options and positioned for a large decline.

The three legs are quoted from bid and ask, the net premium is totalled, and the expiration payoff shows the trough at the long strike where the structure does worst before the two long puts take over further down. Adjust the strikes and the ratio in the input cells to see the entry cost trade off against how far the stock has to fall.

Template Screenshots

Put Ratio Back-Spread screenshot 1

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