Profit, Loss, and Breakeven Economics

What this video covers

• Why time decay (theta) works against debit positions and in favor of credit positions, and why it accelerates inside the final 30 days
• The ironclad vertical spread rule: maximum gain plus maximum loss equals the spread width (difference between strike prices)
• What debit spread holders want at expiration (both options in the money) versus what credit spread writers want (both options out of the money)
• Why a spread's maximum value at expiration is capped at the spread width, never unlimited, because spreads are defined-risk strategies
• The "call up from the lower strike, put down from the higher strike" breakeven pattern that works for every vertical spread
• How to use the max gain plus max loss equals spread width identity as a quick-check formula to catch math errors on exam day
• Why a slightly in-the-money debit spread can still lose money as expiration approaches, because time value erodes faster than intrinsic value accrues