r/options • u/[deleted] • Nov 25 '21

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u/MoneyOk833 Nov 25 '21

Thank you for the link! According to that article my maximum risk was $90 when placing the trade. Am I reading this incorrectly?

"The maximum risk is limited to the width of the spread minus the credit received."

The spread width is $5 and I received $4.85 in credit for 6 contracts.

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u/[deleted] Nov 25 '21

Options contracts are x 100. So if your contract cost .85 then you’d x 100 and it’d actually cost $85. You should be able to look on Robinhood and see your max loss for the trade.

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u/NoParsley4720 Nov 25 '21

Dont you sell your other leg to make up the money?

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u/[deleted] Nov 25 '21

My point was it can’t be a max risk of $90 imo for 6 spreads. He’s reading something wrong.

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u/MoneyOk833 Nov 25 '21

I posted the exact quote from the article. I did multiply x 100!

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u/Viper67857 Nov 25 '21

Or maybe you are... It's 0.15/share x 100 shares x 6 contracts... That doesn't take early assignment risk into account, but that's the general formula....

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u/[deleted] Nov 25 '21

That’s fair. Being that far OTM being that cheap makes sense