Credit Spread Price Moves

[DallasSteve]

If a trader enters a options credit spread he has received an excess premium for selling the options over the cost of buying the options. I'm confused. If the net price of the credit when he entered the spread was $1 and the price of the credit spread has gone down to 90 cents is the trader making money or losing money? I think he's making money if the price goes down, but I'm not sure.

 

[WittyEmily]

Definitely he is making money if the price goes down.

 

[DallasSteve]

Thanks, that's what I thought.

 

[Hakuna Matata]

ahh, credit spreads... those were the days

 

[lloydbee]

those were the days

Those are the days... there's nothing 'were' about them

 

[Hakuna Matata]

think you missed the point hombre

 

[rsh01]

someone wrote this on another forum re credit spreads, thought it was a good point.....

"selling a put spread is intuitively inconsistent, if you feel that the higher strike put is rich, the lower strike should be even richer (unless the skew is inverted)"

 

[lloydbee]

think you missed the point hombre

reading text is always dangerous in setting yourself up for a misinterpretation, I was hoping you'd explain seeing I missed your point..