Option Strategy Question

Discussion in 'Options' started by TimtheEnchanter, Oct 24, 2022.

  1. upload_2022-10-24_7-29-55.png

    How would this strategy make money, allegedly it is risk free (10 USD loss) with potential 169 USD max profit. I just cannot see it, nor my Schwab entry can show any profit. Clearly this is a bearish trade...with no risk if wait till expiration.
     
  2. Matt_ORATS

    Matt_ORATS Sponsor

  3. 2rosy

    2rosy

    it's a back spread.
     
  4. BKR88

    BKR88

    Closing Price Example:
    If price closes at 90 at expiration, you lose ~10 ($1,000).
    Long 90P x3 are worthless.
    Short 100P x1 needs to be purchased for 10 ($1,000) or get assigned 100 shares.
     
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  5. guru

    guru

    $10 is a large loss since the odds for it happening are much higher than the odds of winning big. And back ratios lose value with time (theta) and with volatility drop (post-earnings).
     
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  6. GOOGLPutSpread.jpg Some of the answers help a lot but options action (CNBC) I believe was dead wrong on the analysis of this trade (their guest recommended it). I put this trade on for grins and closed it as I do not believe GOOGL would crash that big in this short timeframe.
     
    Last edited: Oct 24, 2022
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