14 lines
876 B
Plaintext
14 lines
876 B
Plaintext
Ratio Spreads
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The simplest versions of these strategies used by retail traders, institutional
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traders, proprietary traders, and others are referred to as ratio spreads . In
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ratio spreads, options are bought and sold in quantities based on a ratio. For
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example, a 1:3 spread is when one option is bought (or sold) and three are
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sold (or bought)—a ratio of one to three. This kind of ratio spread would be
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called a “one-by-three.”
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However, some option positions can get a lot more complicated. Market
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makers and other professional traders manage a complex inventory of long
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and short options. These types of strategies go way beyond simple at-
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expiration diagrams. This chapter will discuss the two most common types
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of ratio spreads—backspreads and ratio vertical spreads—and also the
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delta-neutral position management of market makers and other professional
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traders. |