# At or Below Lower Strike

## OEX Index is at or below lower strike price of 595 at expiration

If the OEX exercise settlement value is exactly at the lower strike price of 595 at expiration, the short 595 put will be at-the-money and expire with no value.

The long 600 put will be in-the-money and worth its cash settlement amount:

600 (put strike price) – 595 (settlement value) = \$5 x \$100 = \$500

The investor could exercise the long OEX 600 put to receive its cash settlement amount of \$500 and see a profit:

\$500 cash settlement amount received at puts’s exercise
- \$235 total debit initially paid for put spread
\$265 profit

If the OEX exercise settlement value is below the lower strike price of 595, then the investor could expect assignment on the short 595 put and have to pay its cash settlement amount. However, the investor would exercise the 600 put and receive its cash settlement amount, which would always be more than 595 put’s by \$500 (difference in strikes of \$5 x \$100 multiplier).

As an example, say the exercise settlement value of the OEX index is 593.

\$700 settlement amount received at 600 put’s exercise (\$7 intrinsic value x \$100)
- \$200 settlement amount paid at 595 put’s assignment (\$2 intrinsic value x \$100)
\$500 net cash amount received at expiration

Total net profit at expiration, after exercise and assignment, would be:

\$500 net cash settlement amount received
- \$235 total debit initially paid for spread
\$265 profit

On the other hand, if the OEX 600/595 put spread is sold for its intrinsic value as the market settles at 593 on the option’s last trading day, the premium received would be:

\$7 intrinsic value of 600 put (\$600 strike price – 593 OEX level)
- \$2 intrinsic value of 595 call (\$595 strike price – 593 OEX level)

The total profit would be the same as after exercise and assignment of the put contracts: