Between Strikes

OEX Index is between 600 and 595 at expiration


Buy 1 OEX 600/595 Put Spread at $2.35 Debit


>With the OEX exercise settlement value between the two strike prices of $600 and $595 at expiration, the short OEX 595 put would expire out-of-the-money and with no value, but the long 600 put would be in-the-money and worth its cash settlement amount. With OEX below the break-even point of 597.65, the settlement amount received for the 600 put would exceed the total debit initially paid for the spread and the investor would see a partial profit.

As an example, the OEX exercise settlement value is 596. The put’s cash settlement amount would be:

600 (put strike price) – 596 (settlement value) = $4 x $100 = $400

The investor’s partial profit would be:

$400 cash settlement amount received at put’s exercise
- $235 total debit initially paid for spread
$165 profit

On the other hand, if OEX settles above the break-even point (but below the higher 600 strike) the cash settlement amount will be less than the debit paid for the spread and a partial loss would be realized.

For instance, say the OEX exercise settlement value is 599. The put’s cash settlement amount would be:

600 (put strike price) – 599 (settlement value) = $1 x $100 = $100

The investor’s partial loss would be:

$235 total debit initially paid for spread
- $100 cash settlement amount received at call’s exercise
$135 loss


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