Ratio Backspread
Definition
An options strategy that buys more options than it sells at different strikes, creating a position with unlimited profit potential on large moves while limiting risk on moderate moves.
Example
A call ratio backspread: sell 1 ATM call, buy 2 OTM calls. Profits on a large upward move; limited risk if the market stays flat or drops.
Related Terms
Frequently Asked Question
What is a Ratio Backspread?
A ratio backspread buys more options than sold (e.g., sell 1, buy 2). Creates unlimited profit potential on large moves with defined risk. Call backspreads benefit from sharp rallies; put backspreads from crashes.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.