If the short leg exercises, will my broker exercise my long put as well? I don't even have enough to cover 100 shares of both...I will never trade these spreads...if I just bought the puts outright I would be sitting on some cash now...this way I am up $50?
The smarter route would be to just buy the put option outright and hang on to it. I bought some SQQQ call options today. Any option $0.01 in the money at expiration is automatically, exercised by the broker. Most brokers will remind you of that too. If you do not want to be assigned, you should unwind and sell your short option on SPY and QQQ otherwise, the deeper it gets in the money, the more monies you will lose.
I had these for days now...spreads are "safe" but they do not make much either. If/When SPY/QQQ rallies I will perhaps buy back the short legs. If they exercise the short put I could just exercise the long puts but I have not enough funds for both. That is why this whole trade sucks. Outright puts made good money. I cannot lift the short puts because we are due for a bounce today or tomorrow (maybe).
You cap your potential gains to a small amount by opting to trade a spread as opposed to directly, just buying the put option.
If both ITM at expiration, they will be a wash. You better be sure they are going to be ITM, though. After hours action can change your position as well. Also, you need to be careful on spreads if you do not have sufficient funds. I'm assuming you have a margin account since you are trading spreads. Not sure about other brokers, but IB has some pretty draconian liquidation policies. You need to keep a close eye on your positions on expiration day if you are near to margin limits. Even if you have no intent on holding the trade thru expiration, IB doesn't know that. They can liquidate your ITM positions in ways you don't anticipate to bring your margin back in line. Typically this happens up to 2-3 hours prior to close (their discretion). Also, it's a misnomer that spreads are "safe" and they are not just "set-and-forget" trades due to the possibility of assignment (European style options like XSP/SPX are more forgiving).
I just got out of one spread and with margin I am OK. The cost of the spread is $300 and the gap between the strikes is 7 so I, in theory, I would make money, if both got exercised/assigned? I am far from expiration (Jan 2021).