For those who short puts on the S&P, would long put ratio spread do better?

[mgzheng]

For those who sell puts on the s&p (naked or using vertical put spreads), have you looked at using credit put ratio spreads (short otm puts and long a larger amount of further otm puts)? Credit put ratio spreads allow you to benefit from the occasional market crashes (fat tails) as opposed to getting hurt by them. Thanks.

 

[jj90]

Quote from mgzheng:

For those who sell puts on the s&p (naked or using vertical put spreads), have you looked at using credit put ratio spreads (short otm puts and long a larger amount of further otm puts)? Credit put ratio spreads allow you to benefit from the occasional market crashes (fat tails) as opposed to getting hurt by them. Thanks.

I think you mean put ratio BACKspreads. If you can establish them so that the shorts cover the longs, ie. credit, you can collect a few cents here and there and be protected from a market crash. Without going into details of the position, your main worry if the position was opened for a credit, is a slow move down, or if opened for a debit, the underlying not moving past the long strike BE.

 

[momoneythansens]

Quote from mgzheng:

For those who sell puts on the s&p (naked or using vertical put spreads), have you looked at using credit put ratio spreads (short otm puts and long a larger amount of further otm puts)? Credit put ratio spreads allow you to benefit from the occasional market crashes (fat tails) as opposed to getting hurt by them. Thanks.

Can you give an example of these credit backspreads?

The skew makes a credit backspread on the PUT side very difficult.