Bear call spread break even

Question

So I opened my first position last week, a small min risk one to try and see what I don't understand, and it's took a while to improve but things look ok now: https://i.sstatic.net/2mF6A.jpg

For reference the position is a bear call spread composed of

1 MSFT call 139 Price $13.85

-1 MSFT call 136 Price $13.75

Could someone just clarify what exactly is going on. I've been seeing a net P&L loss when MSFT has been priced between 136-139 which confuses me. I thought when I opened the position I was aiming for the price to go below 139 because that's what the call indicates. MSFT right now is at 137 so I'm assuming that my mistake was that I need to be below 136 to make a profit?

Should I be concerned about shares being assigned? And how will expiration affect me? I know options are worthless when they expire so should I be thinking about selling soon?

Thanks a lot!

P.S. Had a look at the calculator here, kind of confused why the exp isn't all 0? https://i.sstatic.net/QskUG.png

Answer 1

For bearish call spreads, the potential profit is the credit received and the risk is the difference in strikes less the premium received. The break even point is the short strike plus the premium received.

Here's the problem; You sold the $136 call for a credit of $13.75 and you bought the $139 call for a debit of $13.85. You PAID 10 cents for this spread. There is no profit potential.

IOW, below $136, both options expire worthless and you lose $10. At $139 or higher you lose $310. That's why nothing makes sense here.

What's wrong with this picture? Normally, the credit should be something, maybe $1.00 to $1.50 rather than 10 cents. Due to market volatility, option premiums have become expensive and bid/ask spread have widened dramatically. My best guess is that you traded at market prices rather than trying to split the bids (trade at the midpoint or better). It's just a bad fill. The only other long shot possibility is that your broker made a mistake in reporting the trade and that's a very, very rare occurrence.

My suggestion is that if you get the opportunity to get out of this spread at a minimal loss, do it.

Suggestion #2 is take a pass on this until you have clearly understand the language of options. Open a paper trading account and learn from your mistakes without paying a price for them. Good luck.