Option Spreads, Credit my Debit Message Board

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Strategies & Market Trends : Option Spreads, Credit my Debit

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To: KFE who wrote (621)	2/21/1999 11:22:00 PM
From: NateC	Read Replies (1) of 2317

Ken.... you wrote <You looked like you had one that would be hard to beat. At those prices prices the risk vs. reward would be very favorable. Think that you may have made a mistake on the bid for the ZDOC. Have it as 1 5/16 bid not 1 15/16. Net credit would be 13/16.> you are ABSOLUTELY RIGHT....so my eyes are bad..and my math incorrect....this means that my net credit on this bull credit spread would only be 13/16 X 2000 = $1,625....vs. worst case scenario of loss of $5,000 (2000 shares X 2.5) My error...and thanks for picking it up......But how about that risk-reward? Do you have some formula you use to evaluate risk-reward in this way.? Actually.....I would like to think I wouldn't lose the $5,000...because I'd set a stop-loss of...say.....1 point above the lower strike price...and close out the spread.....for something less than the total $2.5 difference on expiry.

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