How is the position + delta? And in your subsequent reply you stated that it's not worth the effort as you will accumulate deltas rapidly on a decline. Doesn't compute.
1) To multiply a "negative" by a "negative" gives a "positive". 2) On a price decline, the short-put leg overwhelms the long-put leg. You get "longer" and "longer" on a price decline, i.e. more positive deltas. :eek:
It's ticks, not points. The 118 put is 18 ticks and the 117 put is 9 ticks. Each tick is $31.25. And yes the position will be slightly long delta to start and will get much longer on the way down. There are 32 ticks to a handle. So 32 times 31.25 is $1000 per handle or point.
You want to trade ratio spreads into lower vol environments. So you better understand volatility. You are over simplifying your position here. Ratios are short vol trades so you don't want to have them on in a situation where vol could explode in your face. Example, they are far better served to trade the upside in equity indices are equities as vol tends to decrease on rallies which works in the favor of the ratio spread.
yes, what is that program ? Are there any good free excel spreadsheet risk profiling/pricing/graphing tools out there ? thanks for the feedback guys, i understand now that if the market dumps then the price of the strcture will trade dramatically and you'll have to pay to get out of the trade.