Ratio spread definition

A ratio spread is a strategy used in options trading, in which a trader will hold an unequal number of buy and sell options positions on a single underlying asset at once.

The ratio spread strategy is a variation of the option spreads strategy. The difference between the two is in the ratio of buy to sell positions: in a ratio spread the ratio is always unequal, in an option spread they are equal.

In most ratio spreads, the trader will sell two options for every option purchased (though different ratios can be used). Ratio spreads can be used with either call or put options.

Ratio spreads are most likely to return a profit in the following situations:

  • When the options being used are falling in implied volatility
  • When the underlying asset’s price moves steadily in the trader’s favour

We offer a wide range of options which can be used for a ratio spread.

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