| Position Composition | Risk Profile @ Expiration |
Shown here, both put contracts are OTM. They could also be ITM, or one ITM and one OTM.
 | Short 1 put at a higher strike, Long 1 put at a lower strike.
Both contracts have the same underlying and the same expiration.
The put with the strike price nearest the stock price will have the most time value. |  | Max Loss: Difference between the strike prices minus the credit received for the spread.
E.g., (39 - 38) - $0.50 = $0.50
Max Gain: Total credit received for the spread, which is the credit from the short put less the debit paid for the long put.
E.g., $1.25 - $0.75 = $0.50 |
| Greeks-at-a-Glance | P&L caused by movement in stock price
| Upward movement generates profits; downward generates losses. | P&L corresponding to changes in implied volatility
| If short leg has more time value, falling IV is beneficial and rising IV is detrimental. If long leg has more time value, rising IV is beneficial and falling IV is detrimental. The leg whose strike is closest to the underlying asset price will have the most time value. | Time Decay
C:RR ratio is explained in "Decision Making" | Positive C:RR when short leg has more time value than the long leg. Negative C:RR otherwise. | |
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