Bull Put Spreads - Controlled Risk/Return
- Thread starter rickf
- Start date
Quote from ANCOLL:
I wonder if in the bull put spread, your sold leg (sell put option) become ITM and your bot leg (buy put option) is OTM.
Will your option be exercised before expiration day?
Wont it loss even more?
Honestly, I am in this position and still need advise what to do
If a put option trades at parity or very close to it then you do have a risk of early exercise.
Mathematically, if the cost of carry is more than the price of corresponding call then an ITM put will be exercised early.
You can find some basic examples here.
