CHAPTER 16
Ratio Spreads and Complex Spreads
The purpose of spreading is to reduce risk. Buying one contract and selling another can reduce some or all of a trade’s risks, as measured by the greeks, compared with simply holding an outright option. But creative traders have the ability to exercise great control over their greeks risk. They can practically eliminate risk in some greeks, while retaining risks in just the desired greeks. To do so, traders may have to use more complex, and less conventional spreads. These spreads often involve buying or selling options in quantities other than one-to-one ratios.
Ratio Spreads
The simplest versions of these strategies used by retail traders, institutional traders, proprietary traders, and others are ...
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