Some option strategies such as bear put spread are inherently "loss-limited", meaning that you know in advance your maximum loss.
As an example, if I buy 10 put options for $100 and sell 10 put options (with a lower strike) for $90, then my maximum potential loss in a worst-case scenario would be $100 (and the fees).
At least that's what they say in the books.
I've been thinking if there are any hidden risks with selling options but could only imagine a collapse of the clearing house due to war or other devastating event. But maybe I'm wrong?.. What bugs me is that potential losses while selling options are unlimited. Could there be anything that might prevent my long put from being exercised, but still allow the short put to be exercised (and cost me an arm and a leg)?
I'm talking about European-style options in an EU country, if that matters.