stupid question but if i see a credit spread for 90$ and i need to pay 10$ to pay it so it means my whole risk is 10$ that's my loss but does it mean i can take the 90$ to buy lunch till expiry then it will expire with -10$?
It's means that the equivalent spread (vertical, let's say) is $10 bid. XYZ at $40 and the 36/37 call spread is trading $0.90. You short it. The equivalent put spread is $10. You're risking $10 to earn $90, but the probability is far higher that you're going to lose $10.
I'm confused. You don't pay for credit spreads, they are initiated @ a credit, which you sold. Debit spreads are paid for, and the debit paid is your max risk. Also lets say you sold a credit spread, I don't think you can collateralize the premium sold. Theoretically you can? Someone correct me.
Conversions+reversals, jellyrolls, reversals+rolls yes or maybe a long fly for a credit, discount-arb