6. Leveraged Strategies
Introduction
By leveraged strategies, we mean the ratio backspreads and ratio spreads. These are strategies where your profits (or losses) are increasingly leveraged because of the different number of options you’re buying or selling as part of the strategy.
In this chapter we’re only reviewing four strategies. The ratio backspreads involve buying more options than selling, so there is uncapped upside at an accelerated rate. The ratio spreads involve selling more options than buying, so there is uncapped downside at an accelerated rate. No prizes for guessing which type is preferable!
If we’re to concentrate on the ratio backspreads, we’ll quickly discover that they give limited risk and unlimited reward potential, and ...
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