Hey guys, I'm new here. I am confused as to how and why a vertical spread price can be negative. For example looking at a recent options chain for SPY puts, why couldn't I buy a 210 put @.05 and sell a 207.5 @ 0.08. I am confused to how this becomes a credit trade. If the underlying were to take a tumble I am also long on the better side.
Simply put, bad prices. They could be stale, not real time, etc. This does not happen in real life and you will not get this opportunity to trade the options at these prices.
Like someone else suggested, stop using Yahoo for your quotes. Here'a what the Yahoo April 17 Put Weeklys looked like at the close today: Here's that same information on a real platform (i.e. ThinkorSwim); Note that the quote on the ToS platform for the 207.50 Put is not .08 as suggested by Yahoo, it's .035. Best
I was once tricked by this too, the prices are not real and/or represent some not really liquid options (not this case but I've seen it sometimes)
It's ridiculous to obsess about the pricing of 3ยข options on a $233.32 security, but in any case it's unclear what the "real price" is. Often the last trade is stale by hours or days. Some vendors interpolate/estimate prices, which makes for a beautiful-looking chain, but those aren't traded prices. Also, Yahoo isn't a data vendor, it's an aggregator/republisher. If you want to criticize "Yahoo data," at least dig down and understand the quality of the underlying data vendor(s).
Ever do a large project where you hire a 3rd party who then sub contracts out some portion of the project? If the company you contracted hires some incompetent contractor who then screws things up and you go and complain to the company that you hired, would you accept as a response "well, the contractor I hired to do the work sucks and yet I just keep hiring him for more and more projects". The principle made the decision to provide sub standard service by hiring an inferior contractor. Any problems that arise are on them. Those data vendors are not forcing themselves upon Yahoo. Yahoo has made the decision that those data vendors are acceptable sources for their purposes, which says plenty about how seriously Yahoo takes their data accuracy. That said, one shouldn't complain too much about free data. People should recognize it for what it is -- a ballpark number on the market. It shouldn't be used for trading or strategy development. I don't think Yahoo intends for the data to be used for those purposes either, which is probably why they don't take the accuracy seriously.