Hi, I am new to trading options. Here is my question:
Suppose, I see that historically one particular stock's intermediate declines last about 6 months or more. Having said that there is a couple of 3-4 months declines.
Suppose, I anticipate another intermediate term decline in the next 6 months and I thinking about opening a Bear Put Spread which is a debit spread.
From here, there are a few possibilities:
If there is no decline, I exit with a loss.
If there is a decline that reaches the target (short put strike price) and lasts 6 months or more, the options in the spread get assigned and I exit with a profit.
My question is this:
What if the decline reaches the target in less than 6 months, say 3 months only and it is the bottom? In that case the short put does not get assigned, i.e. I am stuck with the spread.
Will selling the spread give me a profit or its decay will only give me a loss?
What are the factors to take into account before opening a Bear Bull Spread to increase the probability of exiting any time before expiration with a profit?
Thanks.
Thanks
Suppose, I see that historically one particular stock's intermediate declines last about 6 months or more. Having said that there is a couple of 3-4 months declines.
Suppose, I anticipate another intermediate term decline in the next 6 months and I thinking about opening a Bear Put Spread which is a debit spread.
From here, there are a few possibilities:
If there is no decline, I exit with a loss.
If there is a decline that reaches the target (short put strike price) and lasts 6 months or more, the options in the spread get assigned and I exit with a profit.
My question is this:
What if the decline reaches the target in less than 6 months, say 3 months only and it is the bottom? In that case the short put does not get assigned, i.e. I am stuck with the spread.
Will selling the spread give me a profit or its decay will only give me a loss?
What are the factors to take into account before opening a Bear Bull Spread to increase the probability of exiting any time before expiration with a profit?
Thanks.
Thanks