A put backspread sells one put and buys two lower puts. It profits from a sharp decline with large downside payoff, often costs little or nothing, and has limited, defined risk if the stock holds steady.
Open the Put Ratio Backspread calculator →Use it when you expect a sharp drop — around an earnings miss or macro risk — but want to lose little if the stock holds. It is a long-volatility, bearish trade.
Like the call version, it is best opened for a credit so a flat-to-up stock simply leaves you with that credit.
Above the short strike everything expires worthless and you keep any credit. The worst case is the stock finishing at the long strike, where the single short put is in the money but the long puts have little value — the defined maximum loss.
Below the long strike the two long puts outrun the short put, so profit grows steeply as the stock falls toward zero.
Use the free OptionProfit Put Ratio Backspread calculator to load a live option chain, build the trade, and instantly see the payoff chart, breakevens, probability of profit, Greeks and a Monte Carlo simulation of outcomes.
On a sharp decline: the two long puts more than offset the short put, so profit grows steeply below the long strike. A flat-to-up stock leaves you keeping any credit.
Limited — it occurs if the stock finishes at the long strike, where the short put is in the money but the long puts are nearly worthless.
No — the short put lowers the cost (often to a credit) and creates a defined loss zone near the long strike, in exchange for needing a bigger move to profit.
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