Q: Do I need to close a spread if both sides finish in the money at expiration?
A: Yes, all options positions in the money need to be closed prior to expiration, including spreads, butterflies, and condors.
Q: What does it mean when an options position is “in the money”?
A: An options position is considered “in the money” if the option’s intrinsic value is positive. For call options, it means the underlying stock price is higher than the strike price. For put options, it means the underlying stock price is lower than the strike price.
Q: Why do I need to close a spread if both sides finish in the money?
A: Closing a spread with both sides in the money allows you to realize the maximum profit or loss on the position. It also ensures that you avoid any potential assignment or exercise of the options, which could result in unwanted obligations or costs.
Q: What are options spreads, butterflies, and condors?
A: Options spreads, butterflies, and condors are complex options trading strategies involving multiple options contracts with different strike prices and expiration dates. They are used to take advantage of various market scenarios and volatility patterns.