Bear put vs bear call

B

bigspeculate

Is there any advantage to setting up a ITM bear put spread over a OTM bear call? The risk graph of both are similar.
There is a disadvantage of ITM options having wider bid/ask spreads.
 
bigspeculate said:
Yes, if the options are on stocks. What if they're options on the ES or index options?
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We're going to need more info. You have the risk graph so you can see and extrapolate everything mathematically. How long are you going to hold it? Are you looking for a few bucks and then bailing - or holding til expiry? Are you hedging something?

I find some of the advice here is excellent, but even from some of the most knowledgeable traders - the information may be great but might not work for you if your holding times are different or you are treating the position differently.
 
I'm focusing on weeklies on either SPY, ES futures, or SPX index. Holding period is 1 or 2 weeks, til expiration, ideally.
Most sources that I've seen discussing vertical spreads will only touch on bear calls, very few mention bear puts, especially when placed ITM. I imagine that's do to dividend risk as gaussian mentioned.
 
Vertical credit spreads have worse RR ratio than vertical debit spreads. That is my experience then comparing both spreads side by side.
 
Assuming that:

- These are equivalent spreads
- The P&L of each spread is similar
- There are no dividend compications

Then the call spread would be better since the options would expire if the spread succeeded. If still paying commissions, you'd save on that and you'd also avoid closing slippage on ITM puts (possible haircut from wider B/A spread).
 
Considering time decay, I would do a ratio diagonal, long OTM puts around 15 days and short ATM puts around 45 days. Basically try to earn premium over the timeframe.

Premium-Time-Decay.png
 
What Spin said. Whether bull/bear or credit/debit if my system (they ARE systematic trades, right?) wants me to always close winners (because for example the probability of profitable trades is much higher than the losing side) then might as well go with debit spreads. And if my system sez to just let the losers expire OTM, might as well not pay commish and b/a spreads.
 
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