Tips for Put Ratio BackSpread Options Trade: Entry & Exit Signals: Options, Futures, Derivatives & Commodity Trading

Tips for Put Ratio BackSpread Options Trade: Entry & Exit Signals

Details about Entry signals and Exit signals for Put Ratio BackSpread Options Trading
Continuing further from our previous article Ratio Put BackSpread Options Profit & Loss Calculations

Entry Signals for Put Ratio BackSpread Options Trade

- An option trader can benefit from Put Ratio BackSpread Options Trade position if he expects the underlying stock to fall.

- One should keep a close eye on the option premiums for each individual option he is buying - a small change in option premium values can make a big difference for this being a net debit or net credit position

- Expiration period should be kept as long as possible - the more time you give the more volatility and hence the more probability of price movement

- Strike prices should be chosen wisely - higher strike can be around ATM, lower should be one to two strike levels lower than high strike

- Pick options on highly liquid stocks for trading this Put Ratio BackSpread Options Trade

Exit Signals for Put Ratio BackSpread Options Trade

- Since this is a net buy position, time decay will hit you - hence exit from the position at max one month to expiry see (Options Time Decay: Explained with Examples)

- Increase in volatility will help you - if you see big price move downwards, keep a trailing stop loss for closing the entire position

Next, Let's continue further to the Greeks for Ratio Put BackSpread Option: Delta, Gamma, Rho, Vega, Theta
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