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training_data/curated/text/f36a85e31947fbb709600d4de565d449e23074541699475eaa708d508291110d.txt

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+The delta of this trade remains negative throughout the stock’s descent to
+$75. Assuming the $5 drop occurs in one day, a delta averaging around
+−0.36 means about a 1.80 profit, or $180 per spread, for the $5 move (0.36
+times $5 times 100). This is still a far cry from the spread’s $3.70 potential
+profit. Although the stock is at $75, the maximum profit potential has yet to
+be reached, and it won’t be until expiration. How does the rest of the profit
+materialize? Time decay.
+The price the trader wants the stock to reach is $75, but the assumption
+here is that the move happens very fast. The trade went from being a long-
+volatility play—long gamma and vega—to a short-vol play: short gamma
+and vega. The trader wanted movement when the stock was at $80 and
+wants no movement when the stock is at $75. When the trade changes
+characteristics by moving from one strike to another, the trader has to
+reconsider the stock’s outlook. The question is: if I didn’t have this position
+on, would I want it now?
+The trader has a choice to make: take the $180 profit—which represents a
+138 percent profit on the 1.30 debit—or wait for theta to do its thing. The
+trader looking for a retracement would likely be inclined to take a profit on
+the trade. Nobody ever went broke taking a profit. But if the trader thinks
+the stock will sit tight for the remaining time until expiration, he will be
+happy with this income-generating position.
+Although the trade in the last, overly simplistic example did not reap its
+full at-expiration potential, it was by no means a bad trade. Holding the
+spread until expiration is not likely to be part of a trader’s plan. Buying the
+80 put outright may be a better play if the trader is expecting a fast move. It
+would have a bigger delta than the spread. Debit and credit spreads can be
+used as either income generators or as delta plays. When they’re used as
+delta plays, however, time must be factored in.