Alligator Spread

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Definition of 'Alligator Spread'

An Alligator Spread is a profitable spread strategy that is made unprofitable because of large commissions charged on the transaction. An alligator spread is usually used in the options market to describe a collection of put and call options that may not be profitable.

It should be noted that any spread can become an alligator spread if the commissions negate the profits. That is, the alligator spread is not a spread strategy in itself but the commissions that are charged during the execution of the strategy that make it unprofitable.

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