Put Ratio Backspread Nifty Midcap Select: Setup, Payoff and Risk Guide
- August 25, 2026
- Posted by: Kunal Singla
- Category: Market
Nifty Midcap Select level used in this article: Rs 13,850 (as of illustrative reference level; verify current level on NSE). Next monthly (last Tuesday of the month) expiry: 25 August 2026 (Tuesday). Lot size 120. Weekly options on Nifty Midcap Select were discontinued in November 2024 under SEBI’s one weekly index per exchange rule; only monthly contracts remain.
Quick Answer
The put ratio backspread Nifty Midcap Select sells one put at a higher strike and buys a larger number of puts, typically two, at a lower strike, on the same expiry. This is the mirror image of the call ratio backspread, applied to the downside instead of the upside. With Nifty Midcap Select at Rs 13,850, the put ratio backspread Nifty Midcap Select has a defined maximum loss that occurs at or near the lower strike, but substantial profit potential, limited only by the index falling to zero, if Nifty Midcap Select declines significantly beyond that point, since the extra long put has no offsetting short put. The put ratio backspread Nifty Midcap Select may be considered when a trader expects either a large decline or, in some structures, is comfortable profiting modestly if the index stays flat or rises, depending on whether the position is entered for a credit.
The this strategy inverts the logic of a simple bear put spread: instead of buying and selling an equal number of puts, it buys more puts than it sells. This shifts the exposure so that a large decline in Nifty Midcap Select produces substantial profit, while the loss is capped at a specific, calculable level in the middle zone between the strikes.
Because the put ratio backspread Nifty Midcap Select buys more options than it sells, it is often structured for a smaller net debit, and in some cases even a net credit, depending on the strikes and the implied volatility skew between them, which is often more pronounced on the put side of the index options market.
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What Is the The position?
The put ratio backspread Nifty Midcap Select is a multi leg options strategy that sells puts at one strike and buys a larger number of puts at a lower strike, all on the same expiry. The most common version, the 1 by 2 this trade, sells one put and buys two puts.
The legs of a 1 by 2 put ratio backspread Nifty Midcap Select are:
- Sell one put at the higher strike, generating premium and defining part of the risk profile
- Buy two puts at the lower strike, providing substantial downside exposure through the uncovered extra long put
The first bought put is offset by the short put, forming a standard vertical spread in reverse. The second bought put is uncovered on the downside, meaning the this options approach carries substantial profit potential if the index declines significantly, similar to holding an extra outright long put beyond the vertical spread structure.
How Does the Put Ratio Backspread Nifty Midcap Select Work?
With Nifty Midcap Select at Rs 13,850, a 1 by 2 the spread might sell a put near 13,850 and buy two puts near 13,750. Between the two strikes, the position can show its maximum loss, but beyond the long strike, the uncovered extra long put drives substantial profit potential as Nifty Midcap Select continues to fall.
| Parameter | Details |
|---|---|
| Index | Nifty Midcap Select (MidcpNifty) (NSE) |
| Expiry | Monthly only, last Tuesday of the month. Effective September 2025 (NSE index expiry swap). Weekly contracts discontinued November 2024. |
| Lot Size | 120 units (effective from January 2026 per NSE circular, reduced from 140) |
| Strategy Type | Bearish on a large move, defined maximum loss, substantial downside profit |
| Legs | 3 (1 short put, 2 long puts at a lower strike, in a 1 by 2 ratio) |
| Max Profit | Substantial, limited by the index falling to zero |
| Max Loss | Defined, occurring at or near the long strike |
| Margin | Varies dynamically. Check live margin on your broker’s calculator before placing any order. |
Put Ratio Backspread Nifty Midcap Select: Step by Step Setup
- Select the short put strike. With Nifty Midcap Select at Rs 13,850, a strike near or at the current level, such as 13,850, is a common starting point for the this strategy.
- Select the long put strike and ratio. A lower strike, such as 13,750, is bought in a greater quantity than the short put, commonly at a 1 by 2 ratio for the put ratio backspread Nifty Midcap Select.
- Calculate the net debit or credit. This equals the premium paid for the two long puts minus the premium received from the short put, multiplied by the lot size, for the the position.
- Identify the maximum loss zone. The put ratio backspread Nifty Midcap Select typically shows its worst outcome at or near the long strike, not above the short strike or far below the long strike.
- Confirm the position aligns with your market view. The put ratio backspread Nifty Midcap Select benefits most from either a large decline or, if entered for a net credit, from the index staying flat or rising, since the small credit would then be retained as profit.
Illustrative Payoff: Put Ratio Backspread Nifty Midcap Select
Illustrative example for educational purposes only. Strikes and premiums are hypothetical and should not be interpreted as a trade recommendation.
Hypothetical setup: Sell one 13,850 PE at Rs 190 per unit. Buy two 13,750 PE at Rs 95 per unit each. Net debit: Rs 0 per unit. Lot size: 120 units.
| Nifty Midcap Select at Expiry | P&L Per Lot (approx, Rs) | Outcome |
|---|---|---|
| At or above 13,850 | -0 (net debit lost) | All puts expire worthless; net credit or debit determines outcome |
| Near 13,750 | -12,000 (maximum loss, illustrative) | Short put losses not yet offset by the two long puts |
| Well below 13,750 | Growing profit, substantial | Extra uncovered long put drives substantial downside profit |
The put ratio backspread Nifty Midcap Select illustrates a distinctive payoff shape: a defined worst case in the middle zone, with substantial profit potential on a large enough decline, the mirror image of the call ratio backspread applied to the downside.
Greeks for the Put Ratio Backspread Nifty Midcap Select
Delta: The put ratio backspread Nifty Midcap Select generally starts with a modest negative delta that increases in magnitude as the index falls past the long strike, reflecting the growing dominance of the uncovered long put.
Gamma: The put ratio backspread Nifty Midcap Select has positive gamma concentrated below the long strike, meaning the position becomes increasingly responsive to further downside moves in the favourable direction.
Theta: Theta is often negative for the put ratio backspread Nifty Midcap Select since two long options decay against one short option, generally working against the position if the index stays flat.
Vega: The put ratio backspread Nifty Midcap Select is generally long vega, since the two long puts outweigh the vega exposure of the single short put. A rise in implied volatility after entry is generally favourable.
When the Put Ratio Backspread Nifty Midcap Select May Be Considered
The put ratio backspread Nifty Midcap Select may be considered when a trader expects a significant decline in the index, wants substantial downside participation with a defined and calculable maximum loss, or is entering the position for a net credit and is comfortable with the index staying flat or rising as an acceptable outcome.
When NOT to Use the Put Ratio Backspread Nifty Midcap Select
Consider avoiding the put ratio backspread Nifty Midcap Select when you expect the index to move moderately rather than dramatically, since the maximum loss zone sits precisely in that moderate range; when implied volatility is very high, making the long put leg expensive; or when you are not comfortable managing a three leg position with a non intuitive payoff shape.
Risk Management
The put ratio backspread Nifty Midcap Select has a defined and calculable maximum loss, which should be confirmed at entry. Because the worst outcome occurs in the middle zone rather than at either extreme, traders should understand this non intuitive payoff shape before entering the put ratio backspread Nifty Midcap Select and plan exits accordingly if the index approaches the long strike without breaking through it.
Transaction Costs
The put ratio backspread Nifty Midcap Select involves three option contracts (one short, two long in a 1 by 2 ratio), each with its own transaction costs. Brokerage, exchange transaction charges, STT, GST, SEBI charges, stamp duty, and bid ask spread impact across three legs should be weighed against the net credit or debit involved.
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Put Ratio Backspread vs Other Nifty Midcap Select Bearish Strategies
| Strategy | Max Profit | Max Loss | Worst Case Location | Complexity |
|---|---|---|---|---|
| Put Ratio Backspread | Substantial (index to zero) | Defined, at the long strike | Middle zone (at long strike) | High |
| Bear Put Spread | Defined (spread minus debit) | Defined (net debit) | Above the higher strike | Low Medium |
| Long Put | Substantial (index to zero) | Defined (premium paid) | Above the strike | Low |
The put ratio backspread Nifty Midcap Select offers more downside participation than a standard bear put spread by adding an extra long put, at the cost of a less intuitive payoff shape with the worst outcome concentrated in the middle zone rather than above the strikes.
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Conclusion
The put ratio backspread Nifty Midcap Select offers substantial downside participation with a defined and calculable maximum loss, making it structurally distinct from a simple bear put spread. Its non intuitive payoff shape, with the worst outcome in the middle rather than at either extreme, requires careful understanding before use. Always verify current lot size (120 units from January 2026) and expiry schedule before executing any trade, and consult a SEBI registered investment advisor if you are new to multi leg options strategies.
Disclaimer: Data and figures in this article are sourced from publicly available information and may or may not be accurate. All examples are illustrative and hypothetical only. Please verify all data including contract specifications, lot sizes, and expiry schedules with the official NSE (nseindia.com) and BSE (bseindia.com) websites before making any investment decision. Investments in securities are subject to market risk. This content is for educational purposes only and is not investment advice by Univest (SEBI RA INH000013776).
Frequently Asked Questions
What is the put ratio backspread Nifty Midcap Select?
Ans. The put ratio backspread Nifty Midcap Select sells one put at a higher strike and buys a larger number of puts, commonly two, at a lower strike, on the same expiry. It has a defined maximum loss in the middle zone but substantial profit potential on a large decline.
How does the put ratio backspread Nifty Midcap Select differ from a bear put spread?
Ans. A bear put spread buys and sells an equal number of puts, giving fully defined risk and reward. The put ratio backspread Nifty Midcap Select buys more puts than it sells, adding substantial downside profit potential in exchange for a less intuitive payoff shape.
What is the maximum loss in the put ratio backspread Nifty Midcap Select?
Ans. The maximum loss in the put ratio backspread Nifty Midcap Select is defined and typically occurs at or near the long strike, not at either extreme of the possible index range.
Can the put ratio backspread Nifty Midcap Select be entered for a net credit?
Ans. Yes, depending on the strikes and implied volatility skew, the premium received from the short put can sometimes exceed the combined cost of the two long puts, resulting in a net credit at entry for the put ratio backspread Nifty Midcap Select.
What is the current lot size for Nifty Midcap Select options?
Ans. The Nifty Midcap Select lot size is 120 units effective from January 2026, reduced from 140. Always verify the current lot size on nseindia.com before placing any order.
Is the put ratio backspread Nifty Midcap Select suitable for beginners?
Ans. The put ratio backspread Nifty Midcap Select has a non intuitive payoff shape with the worst outcome in the middle zone, making it generally unsuitable for beginners. It is better suited to traders who already understand ratio spreads and multi leg risk profiles.
