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RTH Ratio Spread Review

This is a play I'm looking to get into today, provided we can get a little bounce into the open. The idea is to be moderately bearish in RTH, a retail etf, for the intermediate term, but I'd like to be protected against any kind of short squeeze that may occur. Here's the play:

Buy Feb 75 Put

Sell Feb 70 Put

If filled in the middle of the bid ask, it puts you in a .35 credit, which gives you effectively no upside risk. There is downside risk, but it's way out below 65. You could hedge against that by buying a different set of puts or an OTM calendar spread or something else like that. Here's the risk profile:

There may be some difficulty in getting filled so the actual price may be different. I'm also considering legging into it if I can get some timing correct.

What do you think about this play?

by Steven Place

Steven Place is the founder and head trader at