In the context of options, it is a spread that turns out unprofitable as a result of big commissions charged on the transaction that “eat the investor alive”, irrespective of how market movements are favorable to his combination of options. This spread combines put and call options and depends on the broker’s commission schedules. To avoid being “eaten alive” (i.e., losing most of realized profits to commissions), an investor should watchfully check commissions before entering into transactions.
For example, if the position taken produces a $5000 profit, and commissions amount to $4000, then profits are said to have been devoured by the brokers, keeping for the investor thereby petty leftovers or even nothing.
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