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The bearish mirror image of a Call Ratio Backspread: buys more puts than it sells, giving unlimited profit on a big fall, a defined maximum loss on a moderate move, and a small profit if the underlying barely moves at all.

A Put Ratio Backspread sells a smaller number of near-the-money puts and buys a larger number of further out-of-the-money puts — most commonly in a 1:2 ratio, used throughout this page. Being net long more puts than you're short is what gives the position its large, effectively uncapped profit as the underlying falls — it behaves like a Long Put once the underlying falls far enough, funded partly (or, as in this example, entirely) by the premium from the short put.

This is the exact mirror of a Call Ratio Backspread, with puts instead of calls and the long strike placed below the short strike instead of above it. The single short put funds most or all of the cost of the two long puts; the two long puts are what create the large downside profit potential.

The payoff shape mirrors the Call Ratio Backspread's, reflected around the strikes:

1. At or above the short strike — all three legs expire worthless, and you keep the net credit collected upfront. A flat, real profit zone.
2. Between the short strike and the long strike — the short put is now working against you while the long puts are still worthless, so profit shrinks as the underlying falls, crossing into a loss partway through.
3. At the long strike — the maximum loss occurs here, where the short put's cost is at its highest and the long puts have only just started gaining value.
4. Below the long strike — both long puts are gaining value twice as fast as the single short put is losing it, so the position recovers, crosses back to breakeven, and then grows as the underlying keeps falling.

Small profit if nothing happens, a real loss on a moderate fall, and a return to — then large, growing — profit on a large fall. Like its call counterpart, this strategy specifically dislikes a moderate move in its direction and rewards either no move or a big one.

A Put Ratio Backspread fits a view that the underlying will either stay flat or fall sharply — and specifically, that a moderate decline is the least likely outcome. It's often used ahead of an anticipated event where a large downside move is plausible, since the strategy benefits from a volatility expansion to the downside as much as from the fall itself.

Suppose Nifty is trading at 24,000 with a weekly expiry coming up, and lot size is 65. You think a big fall is plausible, but a small-to-moderate one is not your base case.

1. Confirm the setup. You're open to a flat market or a sharp fall, but want to avoid being hurt by a moderate decline specifically.
2. Sell 1 put at the 24,000 strike, collecting a premium of 140.
3. Buy 2 puts at the 23,700 strike, paying a premium of 58 each — 116 total.
4. Calculate the net credit: 140 − 116 = 24 points, or ₹1,560 at this lot size.
5. Understand the flat zone: at or above 24,000, all legs expire worthless and you keep this ₹1,560 credit.
6. Understand the loss zone: the position loses money between roughly 23,424 and 23,976, bottoming out at a maximum loss of ₹17,940 exactly at the 23,700 strike.
7. Understand the recovery: below 23,424, the position is profitable again, and keeps growing as Nifty falls further — it behaves like an ordinary Long Put from this point on.
8. See how it resolves at expiry:
   • Nifty finishes at or above 24,000 → flat profit of ₹1,560.
   • Nifty finishes at 23,700 (the long strike) → maximum loss of ₹17,940.
   • Nifty finishes well below 23,424, say at 22,500 → a large profit that keeps growing the further it falls.

Quick reference for the same trade:

Based on the worked example above. Notice the dip to a loss between the two strikes before the line turns back up and keeps climbing to the left — the mirror image of the Call Ratio Backspread's shape. Move the cursor over the chart to see profit/loss at any price.

• The strategy specifically loses on a moderate move. If the underlying drifts moderately lower instead of staying flat or falling sharply, this is the worst-case scenario for the position.
• Three separate legs means three separate execution costs — the real-world cost of entering this position is higher than a simple two-leg spread.
• Assignment risk on the short put exists in principle, though NSE index options are typically European-style and cash-settled, removing early-assignment risk specifically.
• This is not a beginner strategy — the non-obvious payoff shape means it's worth reading a payoff diagram carefully before using it.