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Understanding Ratio Spreads

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Ratio spreads finance the purchase of a long option through the sale of a greater number of OTM options.

We use ratio spreads to act on a directional bias, with the max profit area peaking at the short strike. These spreads are executed for a small credit, this eliminates risk to one side of trade.

In this segment Tom and Tony dive into everything you need to know about this classic strategy. Tune in as they cover how to set them up, how we can manipulate strike to change the delta and more!

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