Zeev's Turnips Patch-No Politics (ZEEV)

[mlsoft]

alohamart...

You are trying to put a textbook definition on an unusual trade, in my opinion, and the depth of the "in the money" strikes used means you have to look at it differently. Think about the max gain definition - his max gain would be whatever the excess number of 45 puts he bought (if any) went down and the rest of the spread would nullify each other all the way down to zero. The risk is zero as long as he did not let the Q's get high enough to regain a time premium on the 45's before expiration.

I still believe that the whole intent of the spread is to lift the lower leg at some point in the future when the market appears to have hit a bottom as I explained in an earlier post (#msg-733084). That would give him an effective long position in the Q's with a zero cost basis while drawing interest the whole way. Any additional 45 puts would appear to be a simple bear bet with someone else's money.

Just my opinion, though.

mlsoft