credit spreads

M

met1989

stupid question

but if i see a credit spread for 90$ and i need to pay 10$ to pay it so it means my whole risk is 10$ that's my loss
but does it mean i can take the 90$ to buy lunch till expiry then it will expire with -10$?
 
met1989 said:
stupid question

but if i see a credit spread for 90$ and i need to pay 10$ to pay it so it means my whole risk is 10$ that's my loss
but does it mean i can take the 90$ to buy lunch till expiry then it will expire with -10$?
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It's means that the equivalent spread (vertical, let's say) is $10 bid.

XYZ at $40 and the 36/37 call spread is trading $0.90. You short it. The equivalent put spread is $10. You're risking $10 to earn $90, but the probability is far higher that you're going to lose $10.
 
I'm confused. You don't pay for credit spreads, they are initiated @ a credit, which you sold.

Debit spreads are paid for, and the debit paid is your max risk.

Also lets say you sold a credit spread, I don't think you can collateralize the premium sold. Theoretically you can? Someone correct me.
 
Box arbitrage..

.sigma said:
I'm confused. You don't pay for credit spreads, they are initiated @ a credit, which you sold.

Debit spreads are paid for, and the debit paid is your max risk.

Also lets say you sold a credit spread, I don't think you can collateralize the premium sold. Theoretically you can? Someone correct me.
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