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LOL not advice - only my opinion!

Actually, I disagree that most options expire worthless - this generally only applies to OTMs as most traders will sell anything with intrinsic value. ITMs are usually either closed out before expiry or are exercised. Just check the course of sales the day after ETO expiry and you will see all remaining ITMs being exercised - usually with the code of EP or EC.

Yes, backspreads do need a big move - but they can also be hurt by falling IV. The short call doesn't neutralise the vega of the two long calls. Although it can be put on for a credit in a low IV environment, margin will be required - meaning back spreads are not risk free. These can rapidly move into their loss area as expiry approaches and if the underlying is trading between the two strikes and for this reason, they are usually better to have some time on their side.

I like to break these types of strategies up eg. the call backspread is simply a bear call spread with an extra long call - helps to understand where the risks are lurking.

Personally, I have found them more useful on the put side provided IV is at low levels when entering and they can do very well with strong down moves due to the movement plus IV increasing as well. However, they are simply another tool in the option tool-box.

IMO, they are not a set-and-forget strategy - unless the market moves strongly away and remains well clear of your strikes and you get to keep any initial credit.

<blockquote data-quote="sails" data-source="post: 258535" data-attributes="member: 1340">LOL not advice - only my opinion!Actually, I disagree that most options expire worthless - this generally only applies to OTMs as most traders will sell anything with intrinsic value.&nbsp; ITMs&nbsp; are usually either closed out before expiry or are exercised.&nbsp; Just check the course of sales the day after ETO expiry and you will see all remaining ITMs being exercised - usually with the code of EP or EC.Yes, backspreads do need a big move - but they can also be hurt by falling IV.&nbsp; The short call doesn&#039;t neutralise the vega of the two long calls.&nbsp; Although it can be put on for a credit in a low IV environment, margin will be required - meaning back spreads are not risk free.&nbsp; These can rapidly move into their loss area as expiry approaches and if the underlying is trading between the two strikes and for this reason, they are usually better to have some time on their side.I like to break these types of strategies up eg. the call backspread is simply a bear call spread with an extra long call - helps to understand where the risks are lurking.Personally, I have found them more useful on the put side provided IV is at low levels when entering and they can do very well with strong down moves due to the movement plus IV increasing as well.&nbsp; However, they are simply another tool in the option tool-box.IMO, they are not a set-and-forget strategy - unless the market moves strongly away and remains well clear of your strikes and you get to keep any initial credit.</blockquote>

[QUOTE="sails, post: 258535, member: 1340"] LOL not advice - only my opinion! Actually, I disagree that most options expire worthless - this generally only applies to OTMs as most traders will sell anything with intrinsic value. ITMs are usually either closed out before expiry or are exercised. Just check the course of sales the day after ETO expiry and you will see all remaining ITMs being exercised - usually with the code of EP or EC. Yes, backspreads do need a big move - but they can also be hurt by falling IV. The short call doesn't neutralise the vega of the two long calls. Although it can be put on for a credit in a low IV environment, margin will be required - meaning back spreads are not risk free. These can rapidly move into their loss area as expiry approaches [U]and[/U] if the underlying is trading between the two strikes and for this reason, they are usually better to have some time on their side. I like to break these types of strategies up eg. the call backspread is simply a bear call spread with an extra long call - helps to understand where the risks are lurking. Personally, I have found them more useful on the put side provided IV is at low levels when entering and they can do very well with strong down moves due to the movement plus IV increasing as well. However, they are simply another tool in the option tool-box. IMO, they are not a set-and-forget strategy - unless the market moves strongly away and remains well clear of your strikes and you get to keep any initial credit. [/QUOTE]

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