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The first spread I ever bought, MOT (which no longer exists), was for a 70/80 call spread. The $70 cost me $4.50 and the $80 sold for $3.00. Therefore my cost on ten contracts was $1500. The options expired when the stock was at about $90. Had I only bought the $70, 20/4.5 = 4.44 or a return of $6667 vs the $10K I got for any close over $80. Of course, at ...


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The answer depends on if you are looking at prior to expiration or on an expiration basis. Prior to expiration: As the stock rises, both calls appreciate in value but since you are short the upper strike, it acts as a drag on the call spread's gain. The naked long call outperforms the spread to the upside. The spread costs less and its net delta is ...


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Many of the US options exchanges now offer a 'complex order book' in which combinations of options can be listed as a new security intra-day. Once the 'instrument' is listed, a bid or offer can be placed in this security. Depending on the exchange, they may synthesize prices of the opposing side based on the prices of the individual legs in their order ...


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The broker has nothing to do with the actual filling of your order. He is merely the intermediary between you and the option exchange (unless the broker is a market maker in your underlying). Whatever algoritm the exchange is using is not going to fill one vertical spread and then look to fill the other side. That's legging in and has market risk, ...


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You may want to Sell part of the number of contracts ( say 18 out of 20) and use that proceed along with 10K that you have. So later 2 options will be exercised. Also you said 200 * 300 = $600,000 and it should be 2000 * 300 = $600,000


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That is an in house rule at Robinhood. CBOE Position Limits are typically in the 25,000 to 250,000 contracts depending on the capitalization of the underlying, the number of outstanding shares and the trading volume of the underlying during the past 6 months. That limit is the same for contracts exercised on the same side of the market during any 5 ...


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I would not recommend using a stop order at the open for options, especially at the open. Because options are 'derivative' contracts, they are based on the price of the underlying. Only after the underlying exchanges have opened, do the options exchanges open. And usually then, only a few market participants will actually participate in the opening ...


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There are 6 types of stop orders available at my broker. I have no clue how many of these orders Robinhood supports. The more common ones are: A Stop order is a buy or sell market order if a stop trigger price is attained or penetrated. A Stop order is not guaranteed a specific execution price and may execute significantly away from its stop price. A Sell ...


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A delta neutral position can make money from change in implied volatility, change in underlying price, and/or time decay (if short options). Implied volatility and time decay are self explanatory so let's look at a simple price example. You buy 500 shares of XYZ at $49.75 and ten $50 puts, each with a delta of -50 so you're delta neutral. You own a ...


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If the short leg is assigned early, the broker cannot immediately exercise the other leg, because the assignment notification process occurs overnight. The offsetting exercise obtains the needed cash or stock, but only the trading day after it was needed, incurring one day's interest. See this question.


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As noted, the margin for a vertical debit spread is the cost of the position and that is the maximum loss. The same position can be put on with a credit spread in which case (synthetic), the margin is the difference in strikes less the premium received. In both cases, the loss is limited. However, option approval levels aren't solely based on the margin ...


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Expiration is a closing transaction and is considered to be the sale date of a long option and the purchase date for a short option (proceeds are zero if OTM). The rest of your question is missing details. "If the option expires in the money", did you sell to close? If so, was there a gain or a loss? If not, you accepted auto exercise. Did that close ...


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Well, the increase in the price of the call can be understood by the fact that with increasing volatility the profit form long gamma position hedging increases. This is because from the point of view of no-arbitrage pricing, it is irrelevant how likely the stock is to go up or down because delta-neutral is a hedee against both the possibilities. In a long ...


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If an option is one cent or more in-the-money at expiration, the Option Clearing Corp (OCC) automatically exercises your options whether they are long or short. This is called Exercise by Exception. Small detail but Robinhood is taking credit for what the OCC does and also mischaracterizes it: If your stock is above or near the strike price at ...


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The US options exchange are generally open only from 9:30 AM to 4:00 PM (4:15 PM for index options). This is written in the exchange rules, which are in turn filed with and enforced by the Securities and Exchange Commission. The options exchanges also impose rules on their Market Makers to provide liquidity 'continuously' while the options exchange is open ...


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I'd guess that it's a liquidity issue. Although there are 3,000+ stocks that offer options (and many ETFs as well), an awful lot of them trade by appointment and have hardly any open interest. Therefore, the return (fees and spreads) isn't worth it to a market maker for the time involved. And then there's the issue of daily contract exercise. The OCC ...


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