From Theory To Practice - February 19, 2021 - Closing Out Spreads at Expiration
With our defined-risk strategies that don’t cooperate, we typically like to give these strategies as much duration as possible. This means that from time to time, we will take these spreads all the way down to expiration day.
When this happens, it’s important to understand the theoretical max value on those spreads, so that you can close the trade at a fair value. Since we have a few Vertical Spreads in our portfolio that are fully in-the-money on this February expiration day, we have several examples of how to do this.