Alligator Spread

外汇网2021-06-19 16:16:47 77

An unprofitable spad that occurs as a result of large commissions charged on the transaction, regardless of favorable market movements. An alligator spad is usually used in the options market to describe a collection of put and call options that may not be profitable.

Pricing models and a more efficient market can help reduce the traditional spad on a security, but it is commissions that create the alligator spad, not market inefficiencies. The commissions are dependent on a transaction's brokers. Investors should check the commission schedules carefully to avoid having their profits devoured by the alligator spad.

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