Debit Spread

[plugandplay 0]

Hi,

I have a 15 Nov call debit spread 195/200, with the underlying stock trading the past couple of day above 200 (as of now at 204), why would the value of the spread be staying around $90 and not be nearer it's max value (or at least $200-$300)? Is it just a time issue, 20 days till 15 Nov, and provided the stock stays above 200(my short position) or keeps climbing, the debit spread will increase in value?

 

Thanks,

Mike

[Kim 8,035]

Could you please provide the exact details of the trade?

[plugandplay 0]

Hi David, 

 

....I thought I was detailed, what other details? The option is NVDA if that changes things. As its a 195/200 spread and the stock is at $204, both the long and short calls are ITM, so I would have thought (but obviously I was wrong) it should be trading closer to the max gain of $500 (not the max gain, to much time left, but closer to it). 

Also, if it were to expire 15 Nov where it is today, at $204, would I receive the credit of $500, or do I need to sell it the day of or day before expiration? Actually I plan on selling it when the value of it is 50% of my purchase price, which I would think it should be closer to given the price of NVDA being above both strikes.

 

Thanks

 

[Kim 8,035]

Yes, it changes a lot. NVDA reports earnings on Nov.14, so those options have a LOT of extra time value due to earnings. And the spread value is 3.15, not 0.90.

P.S. it's Kim, not David.

[plugandplay 0]

Thanks Kim, I new about earnings, but didn't realize that affect on the pricing.