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Alligator Spread
What Does Alligator Spread Mean? An unprofitable spread regardless of favorable market movements and due to large commissions charged upon the transactions. An alligator spread is usually used in the options market to describe a collection of put and call options that may not be profitable.
Investopedia explains Alligator Spread Pricing models and a more efficient market can help reduce the traditional spread on a security, but commissions create the alligator spread rather than market inefficiencies. The commissions are dependent on the brokers of a transaction, investors need to check the commission schedules carefully if they don’t want to see their profits eaten by the alligator spread.
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