A ratio spread is an options trading strategy that involves buying and selling options contracts with different strike prices and/or expiration dates. This strategy is designed to take advantage of the difference in premiums between the two options, with the goal of generating a profit while limiting potential losses. In a ratio spread, the trader typically sells more contracts than they buy, creating a net credit. This credit represents the maximum potential profit for the trade, while the difference in strike prices between the options determines the maximum potential loss. Ratio spreads can be used in bullish, bearish, or neutral market conditions, depending on the trader's outlook and strategy.

A ratio spread is an options trading strategy involving the simultaneous purchase and sale of options contracts with different strike prices and/or expiration dates. This strategy aims to capitalize on volatility and directional movements in the underlying asset while managing risk.

In a ratio spread, the number of options bought and sold is not equal, hence creating a ratio between the two legs of the trade. Common ratio spreads include the bull call spread, bear call spread, bull put spread, and bear put spread.

Traders use ratio spreads to potentially profit from changes in the underlying asset's price while mitigating the impact of time decay and volatility fluctuations. This strategy offers versatility, allowing traders to adjust the ratio and strike prices based on market conditions and their outlook on the underlying asset.