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No. of Recommendations: 2
<<what is the favored strategy to close this position?>>

Hi Speed,

Thanks for your kind words.

My rule of thumb is to close out a spread when its value is 90% of the difference between the strikes. Since you have a 2 point spread, 90% would be 1.80. Currently, you can sell your spread for 1.40, so I would hold on for 1.80 based on your assumption that the QQQQ will "continue its upward path next month."

<<time decay lurking>>

I don't know what you paid for the spread, but please keep in mind that in-the-money (ITM) debit spreads can have positive theta, so don't assume that your spread loses money with the passage of time. A debit spread has positive theta if the price of the stock is greater than the price you paid for the spread plus the value of the long strike price.

For example, if you paid $1.25 for your spread, your breakeven is $44.25 (43.00 + 1.25). If the QQQQs are trading at a price above $44.25, then your spread has positive theta and you make money with the passage of time.

Individual options that you are long ALWAYS have negative theta; spreads can have either negative or positive theta.

Jim


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