The Ratio Calendar Put is a bearish strategy that also allows for a slight upside move.


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Strategy: Ratio Calendar Put

Ratio Calendar Put Option Graph

The Outlook: Neutral to bearish on stock price movement, and Implied Volatility currently low or normal. The expectation is that gains will be made if the stock does nothing, or falls, or the IV increases.

The Trade: Sell put(s) using the strike price nearest the current stock price, and a near term expiration date, and buy two puts for each put sold, using the same strike price and an expiration date further out in time.

Gains when: Stock price stays near current stock price, or falls.

Maximum Gain: Unlimited

Loses when: Stock goes above the breakeven point, or before expiration if volatility falls too much.

Maximum Loss : Limited to the initial debit.

Breakeven Calculation: An options calculator or graphing software is necessary to calculate because the breakeven depends on the volatility.

Advantages compared to short stock: Ability to profit from no stock movement as well as a drop in price, much less capital required, "built-in" stop loss.

Disadvantages compared to short stock: Greater risk of 100% loss of the capital invested, limited life.

Volatility: after entry, increasing implied volatility is positive.

Time: after entry, the passage of time is negative.

Margin Requirement : None. Initial debit must be paid in full.

Variations: See the Ratio Calendar Call if your opinion is "neutral to bullish".


  • If you were purely bearish, just buying a Long Put would be less expensive than this position. However, when using a Long Put the stock must fall enough to overcome the initial debit before the position shows a gain. The Ratio Calendar Put can gain with no stock movement.
  • Implied Volatility can have a big effect on this position. If the IV is high when you enter this strategy and then drops, the position will likely be under water until expiration, unless there is a good move lower in the stock price. It is much better to enter when the IV is low. That will give an opportunity to take gains early if the IV rises.
  • This strategy has a psychologically difficult feature, which is that the position will look like a loser right up until expiration day if the stock price stays near the short strike. This is because the strategy has two long puts losing some time value every day the stock does nothing, and one short put that will not lose all it's value until it expires.
  • You might use this strategy if you wanted to be bearishly positioned for an earnings month, but the month before the earnings report you did not expect the stock to move. By selling the short put, you can make some premium to help pay for the two long puts, and possibly profit in two different months.
  • Other variations of Calendar Calls or Calendar Puts can be used if you have a near-term more neutral or bullish or bearish opinion on a stock or ETF, and want to target a "sweet spot" at the current price, or higher or lower than the current price. See Calendar Call, ATM for a neutral strategy, Calendar Call, OTM for a bullish strategy, and Calendar Call, ITM for a bearish strategy.
  • other ratios can be used if you are more or less bearish. You could buy 3 long puts for every 1 short, or 3 long and 2 short, etc.


  • Since this is a neutral to bearish position, the trader is expecting the stock to hold steady or fall. If the stock rises, it is usually wise to exit the trade, taking less than the maximum possible loss. Using the graph at the top of the page, you might exit with a loss of about $75 if the stock rose to about 51, and your loss would be about one-fifth the maximum possible loss, which is the entire debit of $371.
  • If the reason for entry of the trade was to gain from the stock going nowhere in the near term, but hold long puts in case of a bearish move in the long term, then the trader would attempt to hold the position until expiration, assuming the short puts have a chance of expiring worthless. Then the long puts can be held with the expectation of a bearish move, like any other long put position. Even though you collected premium from the short puts, you should not expect to have any sort of a "bargain" on your long puts, because time has passed since you bought them, and the stock has not moved yet.


  • A trader can think of this position as a regular ATM Calendar Put plus a Long Put. By checking an option graph of the regular Calendar Put, the trader can make note of where he might use a stop loss if the stock falls. If the stock does fall to that level, the Calendar Put can be closed out to avoid further damage, while still holding a Long Put for further gains.

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