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THE OPTIONS COURSE- PUT RATIO BACKSPREADS

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THE OPTIONS COURSE PUT RATIO BACKSPREADS The implementation of a put ratio backspread is a great way to play a bear  market. A put ratio backspread is a delta neutral (nondirectional risk  trade), which allows us to profit substantially from strong downward  movement; however, we can also hedge and protect ourselves from up ward movement. Thus, if we are incorrect and the stock goes against us,  we are in a position where we won’t lose anything, or we may even realize  a small profit, depending on how we enter into the trade. I like to use a put  ratio backspread when I can identify a stock with a bearish bias and expect  the stock to make a significant move.  If we are correct and the stock makes  a strong move to the downside, we’ll be in a position with limited profit po tential (the stock can only fall to zero). If we are wrong and the stock  moves against us, we can let the options expire worthless, not have to pay  commissions to exit, and not lose any money o