Confused About Exiting Spreads

D

DoxazoAdonai

If I'm trying to execute a spread based on the following:

BUY KBH-KO KBH NOV 75 CALL DEBIT = $0.30
SELL KBH-KN KBH NOV 70 CALL CREDIT= $0.75
NET CREDIT = $0.45
EXIT Strategy IF NET DEBIT = $1.50

I know how to set a contingent order to get into the spread when the net credit hits or exceeds $0.45, but I don't know what numbers to look at to determine if I've hot my exit "NET DEBIT" of $1.50.

Thanks for your help!

_______________________________________

Scott Sutherland
 
Quote from DoxazoAdonai:

If I'm trying to execute a spread based on the following:

BUY KBH-KO KBH NOV 75 CALL DEBIT = $0.30
SELL KBH-KN KBH NOV 70 CALL CREDIT= $0.75
NET CREDIT = $0.45
EXIT Strategy IF NET DEBIT = $1.50

I know how to set a contingent order to get into the spread when the net credit hits or exceeds $0.45, but I don't know what numbers to look at to determine if I've hot my exit "NET DEBIT" of $1.50.

Thanks for your help!

_______________________________________

Scott Sutherland
More...

Scott,

Not sure the question you're asking. Are you asking for the prices the individual options have to rise to in order for your contingent stop order of $1.50 debit to be placed? (I'm assuming stop since you'd be losing money)

The Ask on the Nov 70's and the Bid on the Nov 75's??
 
I actually got my question answered, but I may have reversed the buy/sell in my example (oops!)

So - are you the "spread god", or are you advocating that we "spread" God?

Scott <><
 
Quote from DoxazoAdonai:

I actually got my question answered, but I may have reversed the buy/sell in my example (oops!)

So - are you the "spread god", or are you advocating that we "spread" God?

Scott <><
More...

you know..i never thought of it coming across like that before but from looking at your fish i understand how you would guess that. i don't see a problem with your reading of it.

i run a trade desk at my firm and they call me the spread god so i thought i'd use it as my username here.

i think i understand your question now and i know you got your answer so you can take or leave my 2 cents. if you're asking how to put the closing trade in at the same time as the opening trade, you can put them both in to open.

so if you were reversing the trade you mentioned to a debit spread of $0.45, (Buy the 70s and Sell the 75s) you can always put in an order at the same time to Buy the 75s and Sell the 70s to open for a credit of $1.50 to open.

Once the first trade occurs you can change the second order to closing or wait until the second one executes and change it then. Some firms change them automatically as there's USUALLY no point in being long an short the same option..
 
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