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DaveLandry
07-24-2014,
Hello Again,
I have a dummy question... :(
I got this trade suggestion from dough.com
Looking at the Vertical Call Spread in the following trade.......

- What does it mean by "max profit" ? Where do the stock need to be at expiration for the "max profit" to be "max" ?

- If the Calls are already so much In the money, wouldn't it just get exercised ?


- Why would there be such a difference between Bid and ask? Isn't it a bad thing?


- The IV is (I'm guessing) 34-35%... is that good or bad?

Thanks a million in advance !!!:oops:

http://www.onlinetradersforum.com/attachments/screenhunter_41-apr-25-00-01-jpg.28619/

DaveLandry
07-24-2014,
Max profit means the most you can possible make on this trade.

It is unlikely anyone will exercise anything while they still have time value left....they can just sell the option and make more. It happens...but not very often. When you exercise an option you lose any time value or volatility value left over. See definitions for "option intrinsic value and extrinsic value".

The bid ask becomes less efficient the further from "at the money" that you go.

For IV look for "current IV percentile" at the bottom of that page under "Today's option Statistics". That will tell you if it is high or low compared to where it has been for the last year. Over 50 is high...under 50 is low.

On a trade like this your probability is less than 1% that you will make anything by expiration.