Originally Posted by
JamesBond
OK. you make a compelling argument. At what point do you close out of the 2900 option? With your spread, you could sell.... what.... carry the one.... ummmm... 25 of those and net $75K in premiums... for the same $300K. am I reading that right?
i didn’t fully answer your question; if your goal is to collect $75k in premium and you want to risk $300k, yes you could sell 25 of those spreads and collect $75k in premium. Your max loss is always the width of the spread minus the premium collected. So in this case
Width of spread
3050-2900=150
credit collected
30
150-30=120 max loss
in a regulation T account (or cash covered), the broker will withhold $12k in BP.
You can extrapolate out from there, which you’ve already done.
long answer long AF; yes.