Ratio Put
Write

What is a ratio put write?

A ratio put write is an income strategy in which you sell two or more puts at the same strike while setting aside cash to cover only one of them. The covered leg behaves like an ordinary cash-secured put; the additional put (or puts) is sold naked, which is what lifts the premium you collect — and the risk you carry. The classic ratio is 2:1 (two puts sold, one covered).

The trade pays off best when the underlying stays flat or grinds higher, letting every sold put expire worthless so you keep the full premium. The danger lives on the downside: below the strike, the extra naked put means losses compound faster than for a single cash-secured put. This is an advanced, neutral-to-bullish play for sellers who can manage open-ended downside.

Key takeaways

• A ratio put write is a neutral-to-bullish income strategy — you want the underlying flat or rising.
• You collect more premium than a cash-secured put because at least one put is sold naked.
• The downside risk accelerates below the strike; it is treated as undefined-risk because of the uncovered put.
• Every short put blocks SPAN + exposure margin — the extra leg materially raises the capital required.
• It suits high-IV, range-bound conditions and disciplined sellers with a clear stop.

How a ratio put write works

You construct the trade by selling 2 or more puts at one strike, ring-fencing cash for a single put and leaving the rest uncovered. Each put obliges you to buy (or cash-settle) the underlying at the strike if assigned. NIFTY and Bank Nifty options are cash-settled, while many single-stock options are physically settled, so an assignment can land actual delivery on you.

As a net seller you benefit from theta decay and a fall in implied volatility — every quiet day above the strike drips premium into your account. The exchange blocks SPAN + exposure margin on each short put, so the naked leg roughly doubles the capital a single cash-secured put would tie up. A sharp drop is the enemy: below the strike both puts go in-the-money and the unhedged one drives losses down with no natural floor short of zero.

The numbers that matter

Worked NIFTY example

Suppose NIFTY is near 22,500 and you expect it to hold above 22,000 into expiry. You run a 2:1 ratio put write: sell two 22,000 puts at a premium of ₹70 each, covering only one with cash. With a lot size of 75, you collect ₹70 × 2 × 75 = ₹10,500 up front (illustrative figures):

• Max profit: ₹10,500, kept in full if NIFTY expires at or above 22,000.
• Downside breakeven: roughly 21,860, where falling put values overtake the premium.
• Loss: below the strike both puts lose, so P&L falls about ₹150 per point (₹75 × 2).

NIFTY at expiry	Outcome	P&L (1 lot ratio)
23,000	Both puts expire worthless	+₹10,500
22,000 (strike)	Both expire worthless	+₹10,500
21,860 (breakeven)	Both ITM, premium offsets	≈ ₹0
21,500	Both ITM, naked drag	−₹64,500
21,000	Both deep ITM	−₹1,39,500

Notice how profit is capped at a tidy ₹10,500 while the loss column drops twice as fast as a single put would — the price you pay for the extra premium.

When to use a ratio put write

• You are neutral-to-bullish and confident the underlying holds above a level you can name.
• Implied volatility is elevated, so put premiums are rich and likely to deflate.
• You want more income than a cash-secured put and can accept the extra downside.
• You have a firm exit or roll plan if the underlying breaks below the strike.

Risks to respect

• Accelerating downside: below the strike, the naked put makes losses fall faster than premium can offset.
• Margin expansion: a falling market raises the SPAN margin on both short puts, forcing top-ups or square-off.
• Assignment: in-the-money puts can be assigned, leaving a cash or delivery obligation at expiry.
• Gap risk: an overnight slide on global cues or results can blow past your breakeven before you can act.

Ratio put write vs cash-secured put

Both sell puts for income, but the ratio version sells more than it covers. A cash-secured put sets aside the full cash to buy the stock if assigned, so its risk is the same as owning the shares from the strike down. The ratio put write keeps that single covered put and adds a naked one for extra premium, magnifying the downside. If you only want disciplined income with the cash to back it, the cash-secured put is the cleaner choice.

Ratio put write vs put ratio back spread

They are near-opposites despite the similar name. A ratio put write is net short puts — you collect premium and fear a crash. A put ratio back spread is net long puts — it usually buys more puts than it sells, paying out big on a sharp fall. Use the put write when you expect calm; use the back spread when you want to be protected, even rewarded, by a violent move down.

Common adjustments

Because the downside is open-ended, most sellers cap it. Buying a further out-of-the-money put against the naked leg converts the ratio into a defined-risk structure close to a bull put spread with extra income on top. Others roll the puts down-and-out when tested, or trim back to a pure cash-secured put once the premium has decayed. Whatever the tactic, decide it before the market moves, not during.

Frequently asked questions

Is a ratio put write bullish or bearish?

Neutral to bullish. You collect maximum premium when the underlying stays flat or drifts higher so every sold put expires worthless.

What is the maximum loss on a ratio put write?

Large and accelerating below the strike because at least one put is naked. The theoretical floor is reached only if the underlying falls to zero, so it is treated as undefined-risk on the downside.

How much margin does a ratio put write need in India?

Every short put blocks SPAN + exposure margin. The extra naked put adds materially to the requirement, well above the premium you collect, and that margin rises as the market falls.

How is a ratio put write different from a cash-secured put?

A cash-secured put sells one fully covered put. A ratio put write sells two or more while covering only one, so the additional put is naked and the downside risk is magnified for higher premium.

The bottom line

The ratio put write is a way to squeeze extra income from a stable-to-rising market: collect premium on covered and naked puts alike, then let time and falling volatility do the work. The catch is a deliberately lopsided payoff — a capped reward against an accelerating downside — so it belongs with experienced sellers who pre-define their exit. For most traders, a cash-secured put or a defined-risk spread harvests similar premium with far less tail risk.

Related strategies & terms

• Cash-Secured Put — one fully covered put, the safer income cousin.
• Ratio Call Write — the upside mirror, selling extra calls for premium.
• Bull Put Spread — define the downside by buying a lower put.
• Naked Option · Theta · SPAN Margin