my question is about a put spread. In a theoretical position where I purchase a put at 70 for 1.60 and sell a put at 65 for .60 with the same expiration date. I am expecting price action in the stock to drop past 70 so the 70 put is ITM and the 65 put that I sold remains OTM. I want the 65 put that I sold to expire worthless dont I? What is the best scenario for this trade? I dont want the price to fall past 65 before expiry do I?? thanks in advance to insight in my confusion.....
you bought the spread for 1 dollar... all you want is the stock to be below 69 at experation... it doesn't matter because the spread will only go to 5.00 dollars and the stock could go to zero and the spread will still only be worth 5.00 dollars...
Ideally, you want the stock to immediately go to $0. That way, you can quickly realize nearly all of your maximum profit instead of waiting for expiration.