I’m blank on this. What is the difference? if I am long credit spread calls, whenever spread increases over the strike spread, i get positive pay-off. if I am long credit spread put, If spread increases, the price drops, so I can put the security the seller of cr spr put and get payoff. Am I missing something here? Exam Date is nearing and started having silly doubts !!! OMG
you’re on the 2nd one mixing up the spread with the underlying asset. if you’re long a credit spread put, you make money if the SPREAD decreases. just like in your call example you make money if the SPREAD increases. if you were long a call/put on some underlying asset- let’s say an equity, your call goes up when the stock goes up, your put goes up when the stock goes down. in calls/puts make sure to remember if your calls/puts are tracking either the underlying itself or the interest rates/spread. 2 different things. you sort of combined them here to confuse yourself. deep breath. you’re good.
Thi is confusing… I though LONG credit spread calls and LONG puts were just like any other LONG calls and LONG puts. You get a payoff from LONG credit spread CALL when prevaling spread is greater than the strike spread You get a payoff from LONG credit spread PUT when prevaling spread is less than the strike spread So in essence - when you are buying a LONG credit spread CALL you are betting on deteroriating credit conditions and spread widening and when buying a LONG credit spread put you are betting on credit conditions to improve and spread narrowing no?