The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone, welcome back. In today's call, we're going to talk about what happens to a stock that expires between strike prices. This is a fairly common fear I guess that people have of trading spreads, whether it’s a credit spread or an iron condor that the stock may potentially finish or end the expiration month in between two different strike prices. To set the stage here and use an example, so we can visually think about this, obviously we’ve got videos on this topic on the website, so if you want to watch a video, but if you visually think about it, it’s not too bad either just in your mind. Let’s say that we’re trading something bullish and we are selling a 48 put option and buying a 46 put option. Let’s say the stock is trading at $50, so we sell the 48 put option, buy the 46 put option. It’s a very simple put credit spread trade. A bullish put spread is really what that's called. Our fear now is that the stock falls below our short strike of $48 and closes above the $46 put option that we bought. Th