Alligator Spread

October 7, 2008 by admin

An Alligator Spread refers to the initiation of a unique mix of call options and put options, which in aggregate generates such a high commission for the broker that it strips most of the profit potential of the trade by way of commissions. Your broker is basically an alligator eating up your potential profits.

Alligator spreads will result in the investor losing money or breaking even on the trade even if the market moves considerably in their favor. Be careful of which broker you use and be sure to check their options commission schedule.

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