An OTM debit spread would expire worthless, meaning you would have lost all of your debit. Any profit made from a debit spread is only made when you sell it back to close the position. The breakeven point for a debit spread is the long strike + debit. Your max profit is spread width - debit and is achieved when the underlying reaches the short.
In contrast, a OTM credit spread puts money in your account as soon as you open the position. You just have to either close the spread at some point before expiration or let it expire worthless if the underlying does not reach the short option before expiration; thus, keeping the entire credit.
If you have option analysis software with TOS being the best, you can see this with a P/L graph.
On Thu, Aug 20, 2009 at 8:38 AM, paul7313 <paul7313@yahoo.com > wrote:
when I have a debit spread, does it put cash into my account when it expires OTM?
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