Replies to post #222170 on Option Millionaires

[leemalone2k3]

It's called a vertical debit spread, where you buy a strike and sell another strike against the sdtrike you bought. The strike I sold offsets the cost of the strikes I bought and limits the gain by the difference in cost between the strikes less the cost of the spread. In this case, the cost of the spread was .11 and the difference between the strikes is 2.00 so the maximum profit would be 1.89 if AAPL closes above 118.00 and the max loss is .11 if it closes below 116. The breakeven stock price is the strike bought + the debit paid for the spread or 116.11. Anything above that will make a profit of 10.00/ penny moved up to the max gain. This is all based on exppiration date. You can sell the spread at any time before expiration. A debit spread must be closed prior to expiration if either strike is itm to avoid exercising.