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Home > Options Boot Camp > Options Boot Camp 370: More Trouble With Vertical Spreads
Podcast: Options Boot Camp
Episode:

Options Boot Camp 370: More Trouble With Vertical Spreads
Category: Business
Duration: 00:25:33
Publish Date: 2025-12-24 00:07:45
Description:

In this episode of Options Boot Camp, your drill instructors Mark Longo and Dan Passarelli dive back into the trenches to tackle a recurring nightmare for retail traders: why "perfect" vertical spreads sometimes result in losses. Following up on a "horror story" from a previous episode involving Marvell (MRV), the team breaks down the mechanics of spread books, broker liquidations, and the hidden risks of trading around major events.

In This Episode, You'll Learn:

  • The Marvell Meltdown: A deep dive into a listener's trade where a winning call vertical on MRV resulted in a loss due to after-hours volatility and broker liquidation.

  • The Reality of Vertical Spreads: Why the P&L diagram is only half the story. We discuss why vertical spreads often perform worse than expected prior to expiration and the role theta plays in the final payoff.

  • Legging vs. Spread Orders: When should you attempt to "leg out" of a spread? Dan and Mark discuss the risks of delta exposure when breaking apart a vertical in a fast-moving market.

  • Broker Routing & PFOF: How Payment for Order Flow and specific broker "spread books" (like Robinhood's) can impact your execution quality, especially in illiquid names.

  • Market Maker Psychology: What determines the width of a bid-ask spread? Dan explains how volatility risk and liquidity determine the "toll" you pay to enter and exit a trade.

  • Mail Call: The team answers listener questions about avoiding spreads during earnings and the rise of prediction markets (binary betting).

Chapters & Key Moments:

  • 00:00 – Introduction and The Quintuple Content Palooza

  • 03:15 – Follow-up: The Marvell Vertical Spread Disaster

  • 07:45 – The pros and cons of "Legging" out of a trade

  • 12:20 – Tips for dealing with unresponsive brokers during liquidations

  • 16:30 – Market Taker Question: What drives the Bid-Ask Spread?

  • 21:10 – Prediction Markets: Is it a trade or a bet?

  • 25:40 – Silver and Crypto: The Question of the Week

Special thanks to our sponsor: TastyTrade.com/podcasts
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