Of course the long leg of the spread DOES protect you.
I wrote that caution because the strike involved is so high. I rarely get involved with stocks like AAPL because of the high strikes.
IF AAPL should descend past your short strike, and does not descend to your long strike, AND you are put, AND you do not have the money to satisfy the put ....
I am simply saying that you should ask your broker what will happen in case you don't know.
Your broker may take the put for you and simply sell the stock charging your account for the difference between the put and the sell price plus a fee. OR he may exercise the long put for you and you will end up with the width of the spread as your cost.
i.e. loss = (Short strike - long strike) - premium.
It's no big deal but I have seen from other posts that some people play options with very small accounts and those people will want to avoid playing with very expensive stocks for that reason. I would imagine your broker will be less likely to go out on a limb for you if you have a mini-account.
I would never have mentioned it but this small issue was the be-all and end-all of PM's existence and I thought I would throw it in in his memory.
I wrote that caution because the strike involved is so high. I rarely get involved with stocks like AAPL because of the high strikes.
IF AAPL should descend past your short strike, and does not descend to your long strike, AND you are put, AND you do not have the money to satisfy the put ....
I am simply saying that you should ask your broker what will happen in case you don't know.
Your broker may take the put for you and simply sell the stock charging your account for the difference between the put and the sell price plus a fee. OR he may exercise the long put for you and you will end up with the width of the spread as your cost.
i.e. loss = (Short strike - long strike) - premium.
It's no big deal but I have seen from other posts that some people play options with very small accounts and those people will want to avoid playing with very expensive stocks for that reason. I would imagine your broker will be less likely to go out on a limb for you if you have a mini-account.
I would never have mentioned it but this small issue was the be-all and end-all of PM's existence and I thought I would throw it in in his memory.
