How the payment is set

Half the lowest valid price for the full spread, after stress and risk checks.

The premium is up to 50% of the lowest valid price for the whole spread (not of either leg's implied volatility), cut further if needed so the conservative model value covers premium, costs and our required edge. No offer under $0.01. A pricier reference never replaces a cheaper valid one.

Pricing method

For margin M, leverage L and promised strike K1, quantity is Q = M × L / K1. The outer strike is K2 = K1 − M/Q for buy lower and K2 = K1 + M/Q for sell higher. The LP gets, per unit, the option at K1 minus the option at K2, so the maximum payout is your margin.

The model values both European legs with skew and stresses both by ±20% volatility. Initial costs and required edge are each 10 basis points of margin. No positive premium, no offer.

Stock option data comes from ThetaData: both legs use one listed expiry with fresh, synchronised prices. Listed American options calibrate the spread but expire later, at the close. A matching listed European spread can also give references, bid reference Q × [bid(K1) − ask(K2)]. Bad references are rejected. Interest and dividend yield start at zero.