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

Options Boot Camp 370: More Trouble With Vertical Spreads

Options Boot Camp