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Glossary Term: RATIO SPREAD

Definition(s) for RATIO SPREAD:


1. ) Constructed with either puts or calls, it is the strategy that consists of buying a certain amount of options and then selling a larger quantity of more out-of-the-money options.

2. ) A term most commonly used to describe the purchase of an option(s), call or put, and the writing of a greater number of the same type of options that are out-of-the-money with respect to those purchased. All options involved have the same expiration date. For example, buying 5 XYZ May 60 calls and writing 6 XYZ May 65 calls. See also Ratio write



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