I’ve been pondering this question since looking a put options for MCD today where I found two options for a credit spread that resulted in a credit $0.01 higher than the width of the spread.
I was looking at buying the $215 put and selling the $217.5 put which has a spread of $2.5 and a max loss (as I understand it) of $250 without taking credit received into account.
Upon looking at the trade, I would have been able to gain a credit of $2.51 if had initiated the trade which results in a max loss (again, as I understand it) of -$1. Which means no matter what happens, I still end up pocketing $1 at minimum.
My only concern would be assignment, but since a credit spread comes with both a short and long leg, if both are in the money I’d still walk away with profit since I can exercise the long leg.
Is there any reason why this would be a bad idea? What are the downsides to such a trade?