Today, we walked through the ways to construct and manage ratio spreads, which are delta biased and have a relatively high Probability of Profit.
A put (call) ratio consists of a long position in an ATM or OTM put (call) option and a short position in two further OTM put (call) options at a lower (higher) strike.
The max profit of selling a put (call) ratio is equal to the width of the spread plus the credit we received. And we can manage the put (call) ratios at their whole credit or 25% of the max profit.
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