No! For this 1st case of @ Expiration the underlying price is $105. Do you agree that the 105 Strike Call and the 115 strike Call positions are worthless? If so, then only remaining thing to consider is the 110 Strike short position, correct? For that position you owe the difference in the current price and the Strike you wrote, which is ($105 - $110) times your size, which it 2 contracts * 100 shares each. I recently went thru an exercise to calculate the Absolute Maximum Risk of an arbitrarily complex position that is working for me. If you wish, I can send to you privately. It is in Perl, so may not be initially obvious.
BTW: For my sanity on tracking positions, I use the following simple algorithm. PnL=CurrentPositionValue+CashFlow; Where CashFlow=SUM of all prior transactions with commissions if appropriate; So in your case, the PnL @ Expiry: -1000 {PositionValue} + (-75){CashFlow};
Yes, we are on the same track there completely! Yes it would be nice to have a look at your script. The only thing that remains is this as you say: Isn't it on the contrary? We sell a call at strike $110. Now if the underlying closes at $105 which is below, we keep the credit. On the other hand if the underlying closes at $115, then your above statment will be that we owe: $115 - $110 = ... $1000 dollar? The same scenario if we sell a put at some strike, say $100, we want the market to close Above $100 to keep the credit?
From Wikipedia: The seller (or "writer") is obligated to sell the commodity or financial instrument to the buyer if the buyer so decides. Strike price: this is the price at which you can buy the stock (if you have bought a call option) or the price at which you must sell your stock (if you have sold a call option).
I will take a simple example that hopefully will help us. We enter a CALL credit spread like this: Buy 1 Call - Strike 110 at 0.50 Sell 1 Call - Strike 105 at 1.00 Underlying will close at 100 on expiration. What is the profit or loss?
Initial Credit == $50 (100 from Short, -$50 from the Long); CashFlow=$50. Expiration, Long is worthless. Short underwater. PositionValue @ Expiration = (100 - 105)X 1 X 100= -$500; PnL=-$500+$50== -$450;
Your calculation is not right. It is the opposite. We simply keep the credit which is the intial credit == $50 We want the underlying to close UNDER $105 at expiration to keep the credit.
Try simplifying it further: Sell 1 Call - Strike 105 at 1.00 Underlying will close at 100 on expiration. What is the profit or loss?