Help understanding Credit Call spreads

R

robin339

Opened a credit vertical Call (6/16/2018 Exp - $95/$96) when TWX on 5/29/2018 when it was trading at $93.95 for .25 credit

However, my account shows P/L day loss everyday, and P/L Open -$930

My question is,

1.why is it showing I am losing money?
2. what would make the short lose money more than the long if the short is closer to the strike price?
3. what happens if I were to let the position just expire, since it is far OTM?

Thanks in advance !

Please see attached
 

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robin339 said:
Opened a credit vertical Call (6/16/2018 Exp - $95/$96) when TWX on 5/29/2018 when it was trading at $93.95 for .25 credit

However, my account shows P/L day loss everyday, and P/L Open -$930

My question is,

1.why is it showing I am losing money?
2. what would make the short lose money more than the long if the short is closer to the strike price?
3. what happens if I were to let the position just expire, since it is far OTM?

Thanks in advance !

Please see attached
More...

1. The losing money part is from your long call that's losing value every day due to time decay as long as its strike is above the underlying. Your long call would have a value of zero on its expiration date if you don't close it out beforehand.

2. The short would lose more money than the long if the underlying increases in value more than the strike of the long call.

3. Your position would all of sudden turn positive and you would end up with a profit of your premium from shorting the call minus the premium you paid on longing the call PROVIDED they both stay OTM.

You should read more on credit/debit spreads on options.
 
robin339 said:
Opened a credit vertical Call (6/16/2018 Exp - $95/$96) when TWX on 5/29/2018 when it was trading at $93.95 for .25 credit

However, my account shows P/L day loss everyday, and P/L Open -$930

My question is,

1.why is it showing I am losing money?
2. what would make the short lose money more than the long if the short is closer to the strike price?
3. what happens if I were to let the position just expire, since it is far OTM?

Thanks in advance !

Please see attached
More...

There are a number of items to point out.

  • Expiration is 6/15/2018 not 6/16/2018
  • TWS is Time Warner and involved in a corporate take over by ATT&T so markets are VERY wide.
  • It is not clear to me with wide markets, when you thought the spread was trading at $0.25 or what your expectation is of what it is trading at now as spreads do not trade as one price at the exchange.
Was this a real or a paper trade? If real, and the deal is not done by 6/15 and the stock is below 95, it will expire worthless. Expect bad marks when markets are wide. And, IMO, stay away from deal stocks and wide markets unless you have more experiance trading them.

Bob
 
  • Take a close look at the quotes your broker uses to determine the unrealized P/L.
  • They might use the ask for both long and short positions - those quotes might be delayed.
  • Check real-time bid/ask quotes for a more accurate unrealized P/L.
 
How would you exit a trade (if at all possible) when the price becomes negative?
If i was to close the above stated trade, it rejects cause of bad price.
 

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Robert Morse said:
Expect bad marks when markets are wide. And, IMO, stay away from deal stocks and wide markets unless you have more experiance trading them.
More...

Would you please be kind enough to elaborate on this or point me towards where I can find more info on this?
I have been coming up with vague search results online.

Thanks again
 
Stop looking at the midpoint when market are very wide. It is a 1 point spread and the stock closed at 95.37. Determine what it is worth. If you want to buy it back, bid that. You can only bid between 0 and $1.00. If you are not sure, start at a very low price, like 0.05 and raise the price by 1 penny up to the most you are willing to pay until you find a seller and don't trade deal stocks again.

Sorry for being direct, but you don't seem to have the tools to have place the trade in the first place.
 
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