New guy here. Doing a vertical call my net cost is $0.90 or $90 for 100 contracts. Some articles have stated my MAX loss is Premium ($0.90) x 100 = $90. MAX Gain is Width - Premium. In my case that's: 3.5 - 0.9 = 2.6 x 100 = $260. This is not Net profit is it? Shouldn't Net Profit be: $260 - $90 (cost coming in) = $150 profit. So shouldn't my MAX loss be $90 coming in and $90 both ends of the option OTM or a total of $180 loss? Many thanks!
Your max loss is $90. The max value of that spread is $350 (if your spread/strike width is 3.5). So your max net profit is $350 - $90 = $260. Your max ROI is 289% ($260 on $90 invested). Not sure what you mean by both ends. If both call options expire worthless (above expiring price) then you’ve lost the $90 you paid for the spread.