bearishCollects credit

Put Ratio Spread

A put ratio spread buys one put and sells two puts at a lower strike, usually for a credit. It profits from drift, modest declines, or nothing at all — everything except a crash through the lower strikes, where the extra short put bites.

When it makes sense

You're mildly bearish or neutral and put skew is steep (lower strikes are rich)
You'd be comfortable owning shares at the short strike if assigned
Entered for a credit, you profit if the stock simply goes nowhere

How it works

Buy one put near the money, sell two puts at a lower strike, same expiration. Max profit is the strike width plus the credit, landed exactly at the short strike. Below it, the naked short put loses like long stock.

Risk & reward

Upside: keep the credit. Downside: losses mount below the lower breakeven, as if you owned 100 shares from the short strike (cushioned by the width and credit). A crash is the failure mode — size it like a cash-secured put, not like a spread.

Worked example

Stock at $110. Buy the 30-day $105 put, sell two $100 puts, for a $0.30 credit ($30). Stock above $105: keep $30. Stock at $100: make $530. Stock at $88: lose about $670.

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