#1
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Question/Confusion on bullish put credit spreads
I've been paper trading bull credit spreads within the last month and was confused by my broker's actions. Again, this is just paper trade, no real money changed hands. The numbers below are obviously made up.
Stock XYZ was trading at $50 3 weeks ago. I sold 1 July $45 put at a premium of $5. I simultaneously bought 1 July $40 put at a premium of $3. Net credit = $2 Expiration is today, last day of trading yesterday. Stock is at $90, which means my credit spread is good. Now the confusion, my broker held the long position but bought to close the short position that was now trading at .05. Why would he do this? Why wouldn't we just let both the long and short options expire and keep the entire premium as opposed to buying the short one back and having to pay additional commission? Since this is a paper trade, I'm not going to contact him on the weekend. I surfed the web and came across a blurb that said "all in the money options must be closed or they will be exercised" but it implied only if the stock was at or below the strike price (not above it). |
#2
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Re: Question/Confusion on bullish put credit spreads
Whoops, never mind, I'm reading my data wrong.
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