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I bought an AAPL debit spread today with expiration on 8/7. Here the details:

Exp. 8/7
Sold      AAPL $365 Call for $32.85
Bought    AAPL $360 Call for $36.40
Max Profit = [(365 - 360) * 100] - 400 = $100
Max Loss = $400 (the premium paid)

So, if by expiration AAPL stays above $365 I'm making the max profit. (correct me if I'm wrong)

However, when following the contract value with my brokerage firm, I noticed that at the end of today, the contract had decreased by $45 and the price of the stock went up. Can someone explain what that happened?

  • Those options have relatively low volume and a wide bid-ask. It looks like you got a crummy fill on your order (did you use a limit order?) and now the price is reflecting the mid-point which indeed is $45 lower than what you paid. – Hart CO Jul 21 at 4:47
  • Yes, I used a limit order that was filled at $4.00 (x100). What you wrote makes sense – thenewjames Jul 21 at 12:48
  • You'll notice lower volume on further dated weeklies vs monthlies, wide bid-ask is often due to poor liquidity, just something to factor in for future trades. – Hart CO Jul 21 at 13:46
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Based on the quotes you provided, the fill would be for a credit of $3.55. For a debit spread, the maximum, profit would be the difference in strikes less the premium received or $145.

I can't answer your question about the $45 decrease because you didn't provide the quotes of the respective legs as well as if this was a real time valuation based on the respective bid and ask prices or a closing valuation. A closing valuation is usually worthless because B/A spreads widen and brokers tend to value the spread at the midpoint of each leg.

To further complicate this, your supposed fill prices were at the exact midpoint of the closing prices so I suspect that something's awry here.

| improve this answer | |
  • As mentioned in the comment above, it is a wide bid-ask, so I ended up paying more to get my order executed. Is there a way that I can edit my question to include more information about the legs? – thenewjames Jul 21 at 12:52
  • If you don't have the ability to edit your question, post the additional info as a comment and then someone will edit it into your question. I don't know the operation here so if you don't have the ability to delete your own comment, add a line that your comment be deleted after the editing is done. – Bob Baerker Jul 21 at 12:57

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