[TheOptionClub.com] Spread Question...

I want to throw out a question that might sound kind of basic, but I want to confirm what I am thinking.

Lets say that I am putting on a spread (regardless of the type) on a short time horizon (eg next expiry). If the spread is an American option then you run the risk of getting an exercise against you no? After all if the option is in the money and it looks like the market might drop I might be tempted to exercise and lock in profit.

However, if I base a spread on European options then I cannot have an execution against me since exercises are only possible at the end.

Please note I am not talking about Bermuda or other exotic options, and let's not get into the discussion of whether or not the exercise could or should happen.

Thanks

Christian Gross

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