Binary options can have value at the time of expiration / settlement, but do spreads have value at expiration or will their value erode to zero due to expiration? For example, if I buy a spread that increases substantially in value during the early phase of the holding period and then there is no price advance / decline in the remainder of the contact period, will those unrealized gains and the original investment erode to zero at expiration or is there any residual value at expiration for spreads?
Residual Value at Expiration
darrell
#2
A binary at expiration is true or false.
It is worth 0 or 100 If > strike on a buy it is worth 100 is not if not its worth 0 If < or = to strike on a sell it is worth 100 if not 0
A spreads value at expiration is simply the difference between where you entered and settlement up to the max profit or dowm to the max loss.
If you buy and it settles 10 ticks higher you mad 10
If it expires 90 ticks higher you made 90
If it expires at the same place you breakeven
If it expires 15 ticks lower you lose 15 etc…
Again the max loss can never be greater than the initial risk and only occurs if on a buy it expires below the floor or if on a sell it expires above the ceiling
And max profit can not exceed the difference between when you bought and the a ceiling or where you sold and the floor (a good problem to have 
There are two types of value in a spread intrinsic (real value) and extrinsic (time /implied volatility value)
Ie spread at 1200 to 1300 marker at 1220 and you buy at 1225
Has 20 ticks of real value (difference between underlying and floor) and 5 ticks of extrinsic value (differemce between where your bought and where the marker is (breakeven distance on the scanner) hence at expiration there is no time premium so the extrinsic value is gone.
Note if the marker is in between the strikes when you enter breakeven distance is the extrinsic value. If the market is outside the spreads floor and ceiling the risk is the extrinsic value
If you bought at 1225 and it expired at 1250 you will make 25…25 ticks higher then you bought
If it expired at 12300 or higher you would make 75 difference between where you bought and the ceiling
If it expired at 1225 you would breakeven as you bought it at 1225
If it expired at 1220 you would lose 5 as you bought at 1225 and say the market did not move so you lost the 5 ticks
If it expired at 1210 you would lose 15 as you bought at 1225
If it expired at 1220 or lower you would lose 25 no matter how low it goes as you bought at 1225 and the floor was 1200