Tag Archives | call spread

Is it still a Calendar Spread?


I am wondering about proper management of a multi-month calendar spread. I initiated the position in November with selling the Nov 40 call and buying the June 40 call. The stock price at that time was around $37 and I had a bullish bias. The stock has trended up and so far the Nov, Dec, and Feb calls that I sold all expired worthless. In Feb I increased my short strike to 41, and it closed just above $40 last Friday.

So now my long June 40 call is in the money, and I will probably look to sell a March 43 call.

My question is this – if my bias remains bullish, is the proper strategy to just keep holding the long June 40 call and keep selling short calls with higher strike prices, or is it smarter to just sell the June 40 call and initiate a new calendar at the 43 strike price (sell March 43/buy June 43)? In my studying of options I haven’t seen this topic discussed – but it seems to me that replacing the June 40 with the June 43 would lock in profit and reduce risk if the price goes down from here and is probably the smart move. Would there be any good reason to not do this? Thanks.


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OTM spread prices


Interesting discussion.

Maverick talks about the fair value of the vertical spreads. I have been wondering about that recently.

For a real life example, at this moment (Dec 14) the Jan SPY 119 Put and the Jan SPY 128 Call both have a probability of expiring in the money of 25%. Yet the Jan 119/118 Put spread is about $0.17, and the Jan 128/129 Call spread is $0.25.

I would have expected that with both short strikes having the same probability of expiring, the vertical spreads would cost about the same, but this is not the case. Furthermore, it seems to me that the Call spread is probably reasonably priced (25 cent credit for 25% probability of expiring) but the put spread offers a poor reward for the amount of risk entailed when selling.

I am guessing that trading this condor or its equivalent would probably be a losing proposition over the long term, for the reasons Maverick points out.




I agree that opening iron condors and ignoring them is probably a losing proposition.  However, no serious trader should do that.  It's pure gambling.  And that's okay for gamblers, not for traders.

When you own investments of any type; when your money is at risk as you seek to earn profits, closing your eyes and hoping that all will be well is simply not viable.  Note to passive investors:  You rebalance portfolios periodically, and thus do not completely ignore your holdings.

Iron condor trading requires active risk management, and that completely changes the odds of success.  So Mav may be theoretically correct, but in practice, a skilled risk manager can take care of business and earn money.  But I must emphasize that it is not a simple task.


I am finding it very difficult to find the words to reply to your observation.  Let's try this:

The Jan 119P and the Jan 128C may each have a 25 delta, but the Jan 118P and the Jan 129C do not have the same delta.  In fact, the Jan 118P delta is more than two points higher than that of the Jan 129C. That affects why the spreads are not equally priced.

Let's consider looking at this from another perspective. Think of the SPY iron condor as positions in two different, but 100% correlated stocks: SPYC for which we sold a call spread.  Also SPYP for which we sold a put spread.

My explanation:

  • SPYC trades with a lower implied volatility than SPYP
  • The two stocks have an identical historical volatility (because each is really SPY), but history tells us that SPYP options are more valuable than SPYC options.  How is that possible?  SPYP put options have undergone huge price surges more often than the call options of SPYC.  SPYC option holders occasionally earned large profits, but that's the result of slow and steady movement in the price of the underlying stock – and not from sudden, large price changes.  Thus, when looking at options that are equally far out of the money, puts trade at higher prices than calls because both buyers and sellers know that there's an added chance for a big price change.  That's why there is a volatility skew
  • The volatility skew results in lower struck options having a higher implied volatility than higher struck options
    • Volatility skew is not linear, but the trend continues through the entire string of options.  The term 'volatility smile' refers to that non-linearity
    • The difference in implied volatility between the two calls (0.50) is less than the difference in implied volatility between the two puts (0.70)
    • That extra 0.20 volatility point difference boosts the price of the farther OTM put compared with the call [i.e., the put is closer in value to it's neighbor than the call]
    • Thus, the put spread is narrower and the call spread is wider
    • We did not use equidistant calls and puts in this discussion.  Instead we worked with equal delta calls and puts, but the reasoning is identical


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    Ratio spreads. Part II

    Taking a few days off . Plan to return Monday.

    Happy Thanksgiving holiday to all.  Let's remember the good things in our lives

    Yesterday I introduced the topic of ratio spreads.  Today let's look at some risk graphs and discuss the reasons for trading these spreads.  It's a very appealing strategy and has a lot to recommend it.  However, potential losses prevents this idea from being in the trading arsenal of the more conservative options trader.  Also, it should be avoided by inexperienced traders.

    Let's take a typical situation.  You anticipate a market rally (or fall) over the near term.  Nothing major.  Perhaps 3-5%.  You want to make a trade that makes a decent profit if your prediction comes true, and are willing to lose money when you are wrong.

    SPY is currently 120 (as I write).  Your expectation is that SPY may rally towards 125 by December expiration.  The question is, how to play. 

    There are many choices.  The most basic play is to buy calls, choosing an appropriate strike.  This is unattractive to some traders because the options may be priced too high or time decay may become too rapid.  Alternatives include selling OTM puts and put spreads or buying calendars etc.  However this discussion is focused on ratio spreads and how to use them.

    Each of those ideas has its good and bad points, and choosing a trading strategy is as much about market expectations as it is about the trader's individual comfort zone.  Even when positions are known to produce identical results (equivalent positions), some traders are more comfortable when trading one strategy rather than another.  We may all know that the results are the same, but if one type of trade makes you feel better, or helps you analyze the position with less effort, then it's better to choose that trading strategy.

    Buy Call Spread

    Choosing the specific option to buy is a discussion all by itself.  However, let's assume that you have confidence in your expectations and buy SPX Dec 121/126 call spreads, paying $1.30 per spread (pay $1.62, sell at $0.32).  The risk graph (figure 1; the thick line represents P/L at expiration and the thin line shows P/L for today.) is as anticipated for a bullish spread.  Thus, profits increase as the market rises, but reach a limit.

    With a simple call spread, you earn the maximum possible profit when the market rallies and both calls are in the money when expiration arrives.


    The ratio spread

    If you want to take extra risk to generate extra cash, instead of making a simple bullish play (buy call spread), you decide to sell extra calls.

    If you have the confidence (or simply want to place the bet) that the market move will occur – but will be limited in scope, then the ratio spread can be advantageous.

    In this example, let's sell one extra Dec 126 call for each debit spread bought.  That means you will be short two Dec 126 calls for each Dec 121 call owned.  Your anticipation is that those 126 calls will expire worthless and backing that belief, you are willing to sell the extra call and collect an extra $32 in premium. [This is a fairly small premium, considering the upside risk.  But that discussion is for a later date]

    This play is not simply a matter of selling extra calls and cashing the check.  Risk of loss is real. If you are not sure why this is true, it's too early in your options education to be trading ratio spreads.  Risk is discussed below, but if this idea is new to you, it is better to avoid this play until you are better prepared to handle the risk management aspect of this strategy. Take a look at figure 2, which represents the profit/loss picture for the ratio spread.

    The red lines represent the ratio spread while the blue line still traces the P/L profile for the debit spread.

    Whereas profits are never threatened when SPY rallies in figure 1, figure 2 illustrates a very different story.  At expiration, profits reach their maximum when SPY is 126.  However, what makes this trade so different from the simple debit spread is the rate at which those profits can disappear when SPY moves above 126. In fact, the graph indicates that all profits disappear when SPY reaches 130.

    Let's consider why this is true.  Your ratio spread consists of two separate positions: the debit spread and the naked short call.  When you made this trade, you paid a debit of $98 per spread. [Paid $1.62 and collected 2 x $32].  When the market moves lower, that $98 represents the maximum possible loss.  This is illustrated by the horizontal red line when SPY is below $121.

    When SPY rallies and reaches $126 (at expiration), the Dec 121/126 call spread reaches its maximum value of $5.00.

    However, you are short one naked call option – and that's the Dec 126 call.  The value of this option increases by $1.00 for every point that SPY rises.  When SPY is $130, it is worth $4.00.  That leaves you with a position worth $1.00.  When you subtract the $98 that it cost to initiate the position, your proit has disappeared (OK, you have $2 before commissions).

    If SPY continues to rise, your idea to own a bullish position has backfired because you underestimated the size of the move.


    That's the tradeoff.  In return for collecting a higher cash premium, you accept the risk of being short one naked option.  When that option moves into the money, it threatens to reduce, and then take away all profits.  And if SPY moves higher, losses mount at the rate of $100 per point.

    to be continued…



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    Zero Risk with Iron Condors: Can I Have my Cake and Eat it Too?

    The following question is slightly edited.  The original question is elsewhere.

    To provide a meaningful reply, I
    requested more information.  Norm has been trading iron condors (with
    real money) for five months.

    Hi Mark,

    "I am trying to come up with a strategy that involves zero risk of a
    sudden downswing in the market because of a terrorist act or other
    negative developments. You mention in previous blogs that one strategy
    is to reduce your overall iron condor position size, but this would
    still leave me with the possibility of losing the maximum for outstanding trades."

    Hello Norm,

    I'm sure you
    understand that risk and reward go together.  If you truly want zero
    risk for a specific market event, the best play is not to have any
    position that loses in the unlikely event that your scenario comes to
    pass. This means you will be out of the market (or part of the market)
    with no potential losses, but that comes with zero reward potential.  Thus, this is not an easy decision – but
    apparently you have made yours.

    "Insurance for the downside is, as you have pointed out, too expensive
    now, and it creates the risk of having to close a position at
    unfavorable prices when the insurance expires."

    Every trade you make has the possibility
    of your being forced (prudently) to cover at unfavorable prices.

    There are
    trades that profit on a market collapse – the event you fear.  Those
    plays are not iron condors, nor are they plays in which you have theta
    (time decay) on your side.  As mentioned, IV is relatively high right
    now, although it has been falling in recent days.

    I don't know whether insurance is too expensive right now.  It's more than I want to pay, but my current positions are much less risky that they have been at other times.  For me, and the fact that I do not need insurance, I can state that it's too costly.

    However, you are much more worried than I and perhaps insurance would be cheap with your mindset.  Let me clarify: I believe there is a realistic chance that the market may fall from its own weight.  It's the terrorist attack that I am forced to ignore.  Otherwise I would be unable to trade.

    The very best play to
    protect your portfolio is to buy some out of the money puts (yes, at what appears
    to be exorbitant prices).

    The most likely outcome is that the puts will
    expire worthless (as does most insurance).  However, by investing
    whatever amount of cash you are willing to place at risk, you can
    prosper on a huge decline.  Is it worth it?  That's a personal decision.  Do you believe you can afford to own some puts and still earn a reasonable return?  If yes, go for it.  But it will be difficult, and you don't have enough of a track record to begin to make a reasonable (or otherwise) guess as to how well you would do.

    "Consequently, I am considering limiting my trades to call credit spreads
    which would have a bearish basis. My concern here is that if I try to
    limit my losses to 1.5 times my average monthly earnings, this limit
    could be reached fairly quickly with an upswing in the market because I
    would not have the put spread income initially offsetting some of the
    loss on the call spreads."

    Also, my not having received the premium from
    both the call and put side of the iron condor could limit my ability to
    make a kite adjustment." 

    Here is my
    major problem with your questions/comments:  You jump form one example to another with no consistency.  You are worried about everything that occurs to you.  I understand that you want to be certain that major risk is covered, and you don't want to be trading in the blind.  Truly, the best way to cover your bases is to trade small while you are learning.  I understand that you do not want to trade small and that you want to earn money.  However, there are three truths that must be faced:

    • Trading with little risk is an excellent investing choice.  But accept the fact that it goes hand in hand with modest (at best) profits
    • You are moving too quickly.  You can learn and I can reply to questions.  However, there is just so much information that cannot be put into simple answers.  You want some experience trading and making decisions.  And that takes time.
    • You are trying to accumulate a large amount of data – and then base future trade decisions on those data. You must keep a detailed journal/diary of your trades, your thoughts, your decisions (even when the decision is to 'do nothing'), and the results.  Reread those journal entries often and see if they speak to you.  See if you can get some nuggets out of the data

    I acknowledge that the more you can
    understand the better trader you will be.  However, there is a limit as
    to how quickly you can gain meaningful experience, but five months is not enough.  Not even close. Why? 

    You must experience all kinds of trading decisions before you can know how well you handle them.  It's easy to trade an iron condor and then cover at a big profit.  It's easy to make a minor adjustment when a trade makes you slightly uncomfortable.  It's more difficult to see a big move in one direction – make a trade to account for that, and then have the market make another good-sized move.  That second move can be in either direction.  How well will you handle that?  Or are you willing to take your chances and make the discovery at the time it happens?

    You write of average monthly earnings.  You have no idea what your average monthly earnings are going to look like over the longer term.  You don't yet know whether you can earn anything as an iron condor trader.  I am NOT being negative.  I am telling you that you are worrying about minute details when the big picture is an untouched canvas. 

    Keep in mind that you plan to sell call credit spreads.  It may be similar, but it is not trading iron condors.  Thus, you have ZERO months of earnings from which to determine your 'average.'

    Data from a
    few months is worse than meaningless.  Yes, worse.  You have not
    experienced enough different market types to know what that average is. 
    Have you made enough adjustment/hold/exit decisions to have a good feel
    for how skillful you are going to be in that area?

    Norm – you are at the beginner stage
    and no
    amount of data that has been collected to date is any more than a hint
    of what you can do.  You do not have any 'useful' average monthly

    If you want to
    establish a maximum monthly loss – and you should do so – then base it
    on the size of your bankroll and the probability (as best you can guess
    it) of taking the loss.  Don't base it on how much you earned when
    trading iron condors – especially when you now plan to trade half iron condors.  the entire strategy is different – similar, yes – but
    it's different.  You have different rules in place.  Rallies with
    shrinking IV are less frightening than declines with expanding IV.  You
    will have to use a different adjustment plan.  The point is your average
    IC earnings are meaningless.

    Yes, you can
    avoid selling put spreads and sell only calls.  That does what you
    seem to have established as your primary objective: No significant loss
    if the rare event occurs.  My question to you is:  Which of the
    following is going to produce more money in your account with an
    acceptable risk level?

    • Sell a reduced number of put spreads,
      presumably earning a small sum, on average, on a continuing basis – but ever fearful
    • Avoiding puts altogether – until
      after the disaster.  Earning less, but without worry

    This is a question, and you should take the time to figure out the answer: 
    If you are that afraid of the loss, have you considered how much that
    loss would be?  Have you taken an option calculator and determined the
    value of a typical spread that you would sell – if the market gapped lower by
    (perhaps) 25% one morning?  Assume IV triples, or make some other
    assumption.  What would that spread be worth?  How much real cash would
    you lose?

    Do the same for the calls spreads and remember to subtract these gains (if any) from the put losses.

    You may be surprised at just
    how little of your portfolio is at risk.  What I am asking is: 
    You are afraid of a specific scenario.  Do you know how much you would
    lose in that scenario?  If you don't – and you clearly do not – how can you fear the scenario?  How can you make intelligent trade decisions when you don't know how much is at risk?  Your assumption that you could not exit the put spreads at any meaningful discount from their maximum value is incorrect.

    Once you do the math (arithmetic), then if you decide that zero risk is the sweet spot
    for you, then it will be an informed decision.  Right now it is a decision based on fear.  Do not misunderstand:  Fear is a great reason for avoiding a trade.  But don't you want a realistic estimate of how much would be at risk?

    That brings us back to the question: Can you sell only call
    spreads, and the answer is yes.  But to do that, you should not be a
    bullish investor.  You don't want to wager against your
    anticipated direction for the market.  So, do you prefer to sell only
    call spreads?  The reply may be 'yes,' and if so, you are trading
    reasonably.  If the answer is 'no' but you feel forced into doing it, I'd suggest you find an alternative strategy.

    "Also, my not having received the
    premium from
    both the call and put side of the iron condor could limit my ability to
    make a kite adjustment."

    Regarding kite spreads;

    a) You don't have to use kites.  There is
    nothing magical about them.

    b) Nothing hinders your
    ability to use the kite strategy  If you want to use it, use it.  You
    seem to have convinced yourself that if the credit collected when
    opening your call spreads is too small, that kites are precluded. 
    Nonsense.  If you decide not to sell credit spreads and pay too much for
    insurance (any type), that's a decision.  It has nothing to do with
    using kites.

    Keep in mind
    that kites are not a simple slap in on and forget it strategy, although
    that's how it appears. 

    Perhaps with only a few months experience, and
    with IV remaining elevated, you ought to think about more useful
    techniques than kites.  I also believe that you have far more to worry
    about than kites.  You are new to this game.  Concentrate on learning
    things that are important to your profitability – and one strategy for
    managing risk is not at the top of that list (as long as you have some
    plan in mind for reducing risk – when necessary).

    "I realize that in the event of a sudden upswing
    in the market due to some government action I would still have the
    exposure of losing the maximum, but this scenario appears to be much less likely than a
    similar scenario on the downside.
    Given my concerns, is it reasonable for me to expect to be profitable if
    I limit my trades to call credit spreads?"

    Norm, I cannot answer this question.  Sure a meltup occurs less often and moves more slowly than a meltdown.  You want my opinion on how well you will do by trading short?   I don't know where the market is headed.  I don't know how far OTM you plan to sell the spreads.  I don't know how quickly (or slowly) you plan to adjust, nor do I know your adjustment plan.  I have absolutely no idea if it is reasonable to expect to make money based on what I know.

    If you are bearish, then it's a very viable trading plan.  Go for it. 

    If you are market neutral with a crash fear, it may be okay to trade this plan.  But I would not be happy camper if I were in your shoes and would choose to trade smaller size. 

    If you are bullish, it's a death wish.

    "Also, would it be too
    personal a question to ask how you made out with your iron condor trades
    during 911 and during the recent sudden drop in the market?"


    Yes, it is far too personal.  I don't remember 2001.  I was not trading iron condors at that time.  I did much
    better than average in 2008, with a small loss for the year and did
    worse than average during all of 2009. 

    The recent drop worked very well for me.  I had no problems for two reasons: My shorts were far enough OTM and I covered some put spreads on the rally.  Trading reduced size also made it easy.

    I believe you have too much on your mind.  You must go after the more important stuff at this stage of your career.  I appreciate your need to understand the details, if you have the time to work on them.  But spend your energy on finding a suitable strategy and figuring out how to deal with your market fears.  There are inexpensive ways to play for a crash.


    June 2010 Expiring Monthly.  Table of contents


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    Option Spread Terminology: Confusion. Bull Call Spread vs Bull Put Spread

    To my readers:  This is one of those lengthy, extra-detailed posts designed to proved a good answer to Carl's question.  I know the information is top-notch.  What I don't know is whether it's just too much.  I'd appreciate a bit of input:

    Hi, Mark!

    I’ve several questions about bull and bear vertical spreads

    1) First off, the confusion factor arises from the fact that any vertical,
    bull or bear, can be placed using all Calls or all Puts.

    2) What is the best way to place a bullish vertical BELOW THE CURRENT PRICE
    (using Puts or Calls)? Please develop this out with a couple of
    scenarios with the pluses and minuses for each.

    3) Which bullish vertical will be most likely to be assigned? Why?

    4) Which bullish vertical has the most inherent adjustment capabilities?

    5) Now, consider the case of a bearish vertical that is placed ABOVE THE

    This, I’m certain, is trivial for you, but my lack of knowledge is
    costing me money.
    Many thanks for your thoughts on this. 



    Hello Carl,

    The fact that this is costing money makes this question a priority for me.  I've incorporated enough materiel here to try to answer in detail.  I truly hope this helps you. By the way, this will be trivial to you also – after you understand it.  Don't be concerned about asking.  This is a very good and practical series of questions.

    This is not complicated – but it can be confusing.  The confusion is through no fault of your own and I anticipate that I can eliminate your problem.  If there are further questions, or if something is not clear, please submit another comment.

    1) Confusion indeed.  That's because most of the options world makes this far more complicated than necessary. There is no need to use all those adjectives to describe a simple position. If you think about these spreads as I suggest below, the confusion disappears.

    Spread terminology

    a) There are ONLY two types of simple vertical spreads:  Call spreads and  Put spreads

    b) There are only two actions: Buy and sell

    c) By definition

    When you BUY a spread, you buy the option with the higher market price. 

    When you sell a spread, you sell the option with the higher market price. 

    [To clarify, if necessary: The 'price' above refers to the option premium, not to the strike price]

    d) When you BUY a CALL spread it is Bullish (Thus, there is never a reason to refer to a bull call spread)

    e) When you SELL a CALL spread, it is BEARISH (Thus, there's no reason to refer to a bear call spread)

    f) When you BUY a PUT spread, it is BEARISH

    g) When you SELL a PUT spread it is BULLISH

    NOTE: Each of these examples is the same as buying or selling a call or put.  If buying a call is bullish, then buying a call spread is bullish.  Pretty simple, isn't it? 

    Why anyone has to add an adjective such as bull or bear to a spread is beyond me.  And then they go further, by telling traders that you can buy or sell a bull put spread.  Then they teach that you can buy or sell a bear put spread.  Far, far too absurd for discussion. Too many words just add to the confusion.

    h) If you choose to trade a put spread, then buying is bearish; selling is bullish.  That's exactly the same as when you buy or sell a put.

    i) If you choose to trade a call spread, then
    buying is bullish; selling is bearish.  That's exactly the same as when
    you buy or sell a call.It just doesn't get an simpler than that.

    Examples below


    1) Remember this:  Carl – the fact that you already
    understand that you can place a bullish trade with either calls or puts
    is significant.  Many traders go for years without ever grasping that
    simple concept.

    To take it one step further, when the strike prices and expiry are the same, buying the call spread and selling the put spread are equivalent.  [In your, hopefully former, terminology, when you buy a bull call spread or use a bull put spread, you are making equivalent trades] That means that the expected profit and loss is essentially identical.

    That also means it makes no difference which you trade.  This is important.  It makes no difference to the profit and loss. You can trade whichever is more convenient (more on this below).  There is no need to play out several scenarios.

    Example: RGTO trades at 63

    a) You can buy a call spread (buying the more expensive 55s)
    Buy  RGTO Aug 55 calls
    Sell  RGTO Aug 60 calls

    You pay a debit of $X

    b) You can sell the put spread (selling the more expensive 60s)

    Buy  RGTO Aug 55 puts
    Sell  RGTO Aug 60 puts

    You collect a cash credit of $Y

    When the markets are efficient, as they almost always are, X + Y = $5 (the difference between the strike prices x 100)

    In other words, if you can buy the call spread by paying $3.80, you will be able to collect $1.20 for the put spread.  Either trade offers the same risk and reward.  Maximum gain: $1.20.  Max loss $3.80

    If you grasp this truth, you are home.  If not, I discuss this concept of equivalent positions in greater detail in The Rookie's Guide to Options or in this blog post.

    2) I prefer to trade options that are out of the money.  I recommend you do the same.  And there are two practical reasons (after all, the goal here is to save money -right?)

    a) In general it is easier to trade less expensive options.  In the money (ITM) options  carry a much higher price tag (premium) than out of the money (OTM) options.  Why easier?  Because the market makers usually make tighter markets for OTM options.  That makes those options easier to trade.

    Speaking of saving money, you do enter your orders as spreads don't you?  Here are two absolute rules that you must (for your benefit) obey:

    i) Never enter a market order when trading options.  Use limit orders

    ii) Always trade these call and/or put spreads using a spread (or combo) order.  DO NOT trade these spreads as two individual trades.  If you don't know how to trade spread orders, get on the phone with your broker's customer service people and get them to show you how to trade spread orders.  Be certain you understand the difference between buy and sell.  This is not an insult to you: some software can get confusing or your broker may use a strange terminology.

    Thus, BELOW THE CURRENT STOCK PRICE, I SUGGEST SELLING THE PUT SPREAD because the calls are in the money and the puts are out of the money, and my advice is to trade OTM options.

    Thus, the better bullish position, using options that are below the stock price, I would sell the 55/60 put spread.

    3) Question 3 distresses me.  Which is more likely to be assigned? 

    I trust that you understand: the only options that are assigned are IN THE MONEY OPTIONS, not out of the money options.  If you do not grasp this concept, it is too soon for you to be trading options.  To have any chance to succeed, you simply must understand how options work.

    If you understand this, then your question is answered: Avoid selling options that are ITM and you face zero risk of being assigned.  Obviously OTM options can become ITM options when the stock price changes.  In that case, you once again face the possibility of being assigned.  But this risk is truly not a problem.  In fact, it is usually a benefit. 

    Bottom line: by trading OTM  options, the chances of being assigned an exercise notice are far less than when trading ITM options.

    I want to clarify:  You asked which vertical is more likely to be assigned.  You are never assigned on a 'whole' spread.  You can only be assigned on a single option – and it does not matter whether it is part of a spread.  Thus, I assume you mean: in which situation are you more likely to be assigned.  The answer is any time you are short ITM options you stand a chance of being assigned.

    Thus, if trading the 55/60 call spread (stock is 63) it is possible to get assigned on the call with the 60 strike price.  However, the chances of getting assigned before expiration are very small.  And if it did happen it would be a gift to you.  Take my word for it, it would be a good thing (assuming there is no dividend involved).

    Why does being assigned frighten you?  Can you let me know?  It is nothing to fear.  Of course if your reason is that it generates extra commissions and fees, then I understand.  That is something to avoid.


    4) "Inherent adjustment capabilities."  As mentioned above – and perhaps you did not know this previously – the positions are  equivalent.  You can easily adjust either position in exactly the same way.  Neither has any advantage

    I still prefer trading the less expensive, out of the money options, and suggest you do the same. 

    5)  If you want to place a bearish trade
    using options that are above the current stock price, then you can buy
    the 65/70 put spread or sell the 65/70 call spread.  Reminder:  These
    are equivalent positions.

    I strongly suggest that you trade the
    calls because they are OTM options.  Using ITM put spreads is a very
    (and I mean very) bad idea.  Whereas it is unlikely that you would be
    assigned an exercise notice ITM calls prior to expiration, that is
    not true for puts. 

    If a put is sufficiently ITM, and if
    the put owner feels there is little chance that the put will move
    OTM prior to expiration, it makes sense to exercise that put.  Let's
    omit the rationale (for now) due to space considerations.

    What you need to know is that selling ITM [AMENDED] puts is a poor choice.  Don't do it and I'll wager that your results
    will improve right off the bat.  Those pesky assignments on put options
    will cease. [To re-iterate, being assigned on calls is often beneficial]

    Carl, I hope all of this is clear.  Please let me know if it is not.  And if you need more help – tell me why this is costing you money.



    "I want to thank you so very much for writing your wonderful introduction to
    options. It's by far the best source of *useful* information that I have read. It explicitly addresses so many
    questions that other, more technical works take for granted."  KS

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