I didn't think to do that, but I'm an idiot and that's what I should have done. I appreciate that question as now I know.
Sorry to hear this but how did you manage to lose 70% of your account on one trade? What were you trading? Thanks.
Thks, awesome advice. I take it that if I stick to just buying options and just vertical debit spreads then I can't lose more than the premium paid? So I know my risk from the onset?
Couple cases I can think of where it goes wrong 1. Before expiration, you get exercised on the short strike and the broker liquidates the stock due to insufficient margin. You could experience large pnl from the open option legs. 2. The options expire with underlying between the vertical strikes. You get exercised on the ITM option and there is a gap in the underlying price.
Thanks for replying. I agree with you that vertical debit spreads cannot be considered 100% defined risk. In a different forum I brought up the point you made at 2 about gaps but could not get a definitive answer. However, I do believe that this is a real risk and, for that reason, it is wrong for people to say that spreads have defined risk. The only options with defined risks are simple buys of calls and puts.