Ratio Put Spread Calculator

Butterflies & RatiosbearishUndefined Risk

Buy one put and sell multiple lower-strike puts for a bearish trade with downside risk.

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What Is a Ratio Put Spread?

A ratio put spread buys one put at a higher strike and sells two or more puts at a lower strike in the same expiration. The standard version is the 1 by 2. The extra short put brings in enough premium to offset most or all of the cost of the long put, so the trade is typically entered for a small debit, at even money, or for a small credit.

Up to the short strike the position works like a bear put spread, gaining value as the stock declines. Maximum profit occurs when the stock closes exactly at the short strike, where the long put holds its full spread value and both short puts expire worthless. Below the short strike, one short put is covered by the long put but the second is naked, so the position gives back its gains dollar for dollar and eventually shows a loss that grows all the way to a stock price of zero.

The payoff diagram is a tent with a small flat region on the upside equal to the debit or credit, a peak at the short strike, and a straight slope downward below it. It suits a moderately bearish trader who expects a decline to support but not a collapse, or one who would be happy to buy the stock at the lower strike if assigned.

Setup

BUY1x ATM PUT

SELL2x OTM2 PUT

Max Profit

Highest near the short strike

Max Loss

Large downside risk from the extra short put

Breakeven

Depends on strikes and net premium

Ratio Put Spread Example

XYZ trades at $100 with 45 days to expiration. You buy one $100 put for $3.40 and sell two $90 puts for $1.20 each ($2.40 total). The trade opens for a net debit of $1.00 per share, or $100 for the 1 by 2 position. The spread between strikes is $10.

Stock at expiration	Result
$100 or above	All three puts expire worthless. You lose the $100 debit, which is the maximum loss on the upside.
$90	The $100 put is worth $10.00 ($1,000) and both $90 puts expire worthless. P&L is $1,000 minus the $100 debit, or $900, the maximum profit.
$81	Lower breakeven. The $100 put is worth $19.00 ($1,900) and the two short $90 puts cost $9.00 each ($1,800). Intrinsic value nets to $100, which the $100 debit cancels.
$75	The $100 put is worth $25.00 ($2,500) and the two short $90 puts cost $15.00 each ($3,000). Net intrinsic is −$500, and after the $100 debit the loss is −$600. Every further dollar of decline adds $100 to the loss.

Maximum profit is $900 if XYZ closes at $90. The upside loss is limited to the $100 debit, and the profit zone runs from the $99 upper breakeven down to the $81 lower breakeven. Below $81 the naked put loses without a floor until the stock reaches zero, where the loss would be $8,100.

When to Use a Ratio Put Spread

You are moderately bearish and expect the stock to fall to a support level and hold there, rather than crash.
Put implied volatility is elevated relative to at-the-money options, a common condition because of downside skew, which makes the two short puts relatively rich.
You want a bear put spread but prefer to reduce or eliminate its cost by selling an additional put.
You would be willing to own the stock at the lower strike, so assignment on the extra short put is an acceptable outcome rather than a disaster.
Typical entries use 30 to 60 days to expiration, with the short strikes placed at a level the stock is unlikely to breach before expiration.

Risks to Understand

Downside risk is large. One short put is uncovered, and a sharp sell-off or gap down through the lower breakeven loses $100 per dollar of decline, with the theoretical maximum reached at a stock price of zero.
The naked put drives a high margin requirement. Brokers typically require the same collateral as a short put, which can be many times the debit paid.
Rising implied volatility, which usually accompanies a falling stock, inflates the two short puts faster than the single long put and produces mark-to-market losses even near the short strike.
Short puts that are in the money can be assigned early, especially when they are deep in the money with little time value left, leaving you long stock you did not intend to hold.
The maximum profit only appears at expiration. A fast drop to $90 with weeks remaining shows a much smaller gain, because the short puts still carry time value.

Managing the Trade

Close for a partial profit once the stock nears the short strike and most of the potential is captured, rather than holding for the last few dollars through high gamma.
If the stock falls through the short strikes, buy back one of the two short puts to convert the position into a defined-risk bear put spread.
Rolling the short puts down to a lower strike or out to a later expiration is another option, though it usually requires paying a debit when the stock is moving against you.
Decide in advance whether you want to own the stock at the short strike. If you do not, treat the lower breakeven as a hard exit price.
If the stock rallies and the position is nearly worthless, closing it early frees margin and removes the tail exposure for the remainder of the cycle.

Ratio Put Spread FAQs

What is a ratio put spread?: It is an options position that buys one put at a higher strike and sells two or more puts at a lower strike in the same expiration. The extra short put lowers the cost of the spread but adds significant downside risk. The trade earns its maximum profit when the stock closes at the short strike.
How do you calculate max profit on a ratio put spread?: Maximum profit is the difference between the long and short strikes, minus the net debit paid or plus the net credit received, multiplied by 100. With a $100 long put, $90 short puts, and a $1.00 debit, the maximum profit is $9.00 per share or $900. It is realized only if the stock expires exactly at $90.
Where are the breakevens on a 1 by 2 put ratio spread?: For a debit spread the upper breakeven is the long strike minus the debit, and the lower breakeven is the short strike minus the spread width plus the debit. In the example the breakevens are $99 and $81. If the spread is opened for a credit there is no upper breakeven, since the position profits at any price above the long strike.
Is a ratio put spread the same as a put backspread?: No, they are mirror images. A ratio put spread buys one put and sells two lower puts, profiting from a moderate decline and losing on a crash. A put backspread sells one put and buys two lower puts, losing on a moderate decline and profiting from a crash.
What is the maximum loss on a ratio put spread?: The downside loss is not capped by the options themselves. It equals the lower breakeven price multiplied by 100 if the stock falls to zero, which in the example is $8,100. On the upside the loss is limited to the debit paid, $100 in the example.
What happens if I get assigned on the short puts in a ratio put spread?: Each assigned put obligates you to buy 100 shares at the short strike. If both are assigned you own 200 shares and still hold one long put, which protects only 100 of them. Many traders exercise or sell the long put against 100 shares and then decide whether to keep the rest.

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What Is a Ratio Put Spread?

Ratio Put Spread Example

Stock at expiration	Result
$100 or above	All three puts expire worthless. You lose the $100 debit, which is the maximum loss on the upside.
$90	The $100 put is worth $10.00 ($1,000) and both $90 puts expire worthless. P&L is $1,000 minus the $100 debit, or $900, the maximum profit.
$81	Lower breakeven. The $100 put is worth $19.00 ($1,900) and the two short $90 puts cost $9.00 each ($1,800). Intrinsic value nets to $100, which the $100 debit cancels.
$75	The $100 put is worth $25.00 ($2,500) and the two short $90 puts cost $15.00 each ($3,000). Net intrinsic is −$500, and after the $100 debit the loss is −$600. Every further dollar of decline adds $100 to the loss.

When to Use a Ratio Put Spread

You are moderately bearish and expect the stock to fall to a support level and hold there, rather than crash.

Put implied volatility is elevated relative to at-the-money options, a common condition because of downside skew, which makes the two short puts relatively rich.

You want a bear put spread but prefer to reduce or eliminate its cost by selling an additional put.

You would be willing to own the stock at the lower strike, so assignment on the extra short put is an acceptable outcome rather than a disaster.

Typical entries use 30 to 60 days to expiration, with the short strikes placed at a level the stock is unlikely to breach before expiration.

Risks to Understand

Downside risk is large. One short put is uncovered, and a sharp sell-off or gap down through the lower breakeven loses $100 per dollar of decline, with the theoretical maximum reached at a stock price of zero.

The naked put drives a high margin requirement. Brokers typically require the same collateral as a short put, which can be many times the debit paid.

Rising implied volatility, which usually accompanies a falling stock, inflates the two short puts faster than the single long put and produces mark-to-market losses even near the short strike.

Short puts that are in the money can be assigned early, especially when they are deep in the money with little time value left, leaving you long stock you did not intend to hold.

The maximum profit only appears at expiration. A fast drop to $90 with weeks remaining shows a much smaller gain, because the short puts still carry time value.

Managing the Trade

Close for a partial profit once the stock nears the short strike and most of the potential is captured, rather than holding for the last few dollars through high gamma.

If the stock falls through the short strikes, buy back one of the two short puts to convert the position into a defined-risk bear put spread.

Rolling the short puts down to a lower strike or out to a later expiration is another option, though it usually requires paying a debit when the stock is moving against you.

Decide in advance whether you want to own the stock at the short strike. If you do not, treat the lower breakeven as a hard exit price.

If the stock rallies and the position is nearly worthless, closing it early frees margin and removes the tail exposure for the remainder of the cycle.

Ratio Put Spread FAQs

What is a ratio put spread?

It is an options position that buys one put at a higher strike and sells two or more puts at a lower strike in the same expiration. The extra short put lowers the cost of the spread but adds significant downside risk. The trade earns its maximum profit when the stock closes at the short strike.

How do you calculate max profit on a ratio put spread?

Maximum profit is the difference between the long and short strikes, minus the net debit paid or plus the net credit received, multiplied by 100. With a $100 long put, $90 short puts, and a $1.00 debit, the maximum profit is $9.00 per share or $900. It is realized only if the stock expires exactly at $90.

Where are the breakevens on a 1 by 2 put ratio spread?

For a debit spread the upper breakeven is the long strike minus the debit, and the lower breakeven is the short strike minus the spread width plus the debit. In the example the breakevens are $99 and $81. If the spread is opened for a credit there is no upper breakeven, since the position profits at any price above the long strike.

Is a ratio put spread the same as a put backspread?

No, they are mirror images. A ratio put spread buys one put and sells two lower puts, profiting from a moderate decline and losing on a crash. A put backspread sells one put and buys two lower puts, losing on a moderate decline and profiting from a crash.

What is the maximum loss on a ratio put spread?

The downside loss is not capped by the options themselves. It equals the lower breakeven price multiplied by 100 if the stock falls to zero, which in the example is $8,100. On the upside the loss is limited to the debit paid, $100 in the example.

What happens if I get assigned on the short puts in a ratio put spread?

Each assigned put obligates you to buy 100 shares at the short strike. If both are assigned you own 200 shares and still hold one long put, which protects only 100 of them. Many traders exercise or sell the long put against 100 shares and then decide whether to keep the rest.