Again it's all abt risk reward ratio. If u go closer strike to spot to sell, to get benefited of positive theta bt your profit will be less compared to deeper otm option to sell
what if after buying long call vertical spread , later then i received assignment on my short call component , could that happen ? what would be the impact of that on my trade ?
Yes that could happen - the risk profile of the trade doesn't change - just the buying power would increase as you'd have 100 short shares of stock. This is rare though, and you can gauge assignment risk by looking at extrinsic value in the ITM short call - the less extrinsic value there is, the higher your risk of assignment is.
Again it's all abt risk reward ratio. If u go closer strike to spot to sell, to get benefited of positive theta bt your profit will be less compared to deeper otm option to sell
genius! never thought about debit spreads this way!!!
So risking 480 to profit 20 in the first example?
even worse risking $400 to make $10 in the second
Nice tricks!!
thanks great idea
Does this idea work for Credit spread?
No - credit spreads are already purely extrinsic value, so there is no intrinsic value to offset.
what if after buying long call vertical spread , later then i received assignment on my short call component ,
could that happen ?
what would be the impact of that on my trade ?
Yes that could happen - the risk profile of the trade doesn't change - just the buying power would increase as you'd have 100 short shares of stock. This is rare though, and you can gauge assignment risk by looking at extrinsic value in the ITM short call - the less extrinsic value there is, the higher your risk of assignment is.
nice vid