Ratio Spread (Paperback)

Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. Ratio-spread is a strategy in options trading that involves buying some number of options and selling a larger number of other options of the same underlying market and (usually) the same expiration date, but of a different strike price. Ideally, this strategy should be used when either A) the implied volatility of the options expiring in a particular month has recently moved sharply higher and is now beginning to decline, or B) the trader believes for whatever reason that the underlying market of the option(s) will move steadily in his favor during the life of the option. The trader will use call options in this strategy if he believes the underlying market will move steadily higher, and put options if he believes the market will move steadily lower.