How is this strategy possibly sustainable?

[taowave]

All joking aside,go over the 2 spreads in OptionStrat and look at Expiry.You will see that they are equivalent.

For some odd reason,you seem to have a block. It's pretty simple..

P.S. when you talk about skew,talk percent of spot (some like delta),not put vs call.

lol I had that mixed up...down a lot, down a little, sideways, or up a little.

 

[wxytrader]

All joking aside,go over the 2 spreads in OptionStrat and look at Expiry.You will see that they are equivalent.

For some odd reason,you seem to have a block. It's pretty simple..

P.S. when you talk about skew,talk percent of spot (some like delta),not put vs call.

How are the equivalent when one is profitable in four different scenarios and the other one is only profitable in one scenario

 

[Slow Learning Elf]

How are the equivalent when one is profitable in four different scenarios and the other one is only profitable in one scenario

Because you’re missing the present value component from your thinking. Like @taowave said, model the whole thing in some sort of option-analysis software.

 

[destriero]

 

[taowave]

Lets make it super simple...

2 weelk Verticles,same strikes
Stock at 100
95-100 call spread trading at 4
100 95 put spread trading at 1

Show me a scenario(stock price at expiration) where one "outperforms" the other..

Buy the CS vs sell the PS

or

Buy the PS vs sell the CS

2 nanoseconds and you should know max risk and reward for either scenario..

Move the stock price wherever you like,and prove to me,and yourself one spread is superior/inferior to the other..

How are the equivalent when one is profitable in four different scenarios and the other one is only profitable in one scenario

 

[wxytrader]

Lets make it super simple...

2 weelk Verticles,same strikes
Stock at 100
95-100 call spread trading at 4
100 95 put spread trading at 1

Show me a scenario(stock price at expiration) where one "outperforms" the other..

Buy the CS vs sell the PS

or

Buy the PS vs sell the CS

2 nanoseconds and you should know max risk and reward for either scenario..

Move the stock price wherever you like,and prove to me,and yourself one spread is superior/inferior to the other..

Yes they are both defined risk...not disputing that but the credit spread out performs in probability of P/L not in P/L...it will likely have a worse risk reward than the long put...but that's a fair trade off because of the positive theta working in your favour from day 1.

 

[taowave]

Are you suggesting that at some point a trader could buy the 5 point box for 4.75 or sell it at 5.25??

If the call spread goes to 3,what happens to the put spread???

If the call spread goes to 5,what happens to the put spread??

Neo,now do you beleive??

Yes they are both defined risk...not disputing that but the credit spread out performs in probability of P/L not in P/L...it will likely have a worse risk reward than the long put...but that's a fair trade off because of the positive theta working in your favour from day 1.

 

[Quanto]

@wxytrader, prove your claim with PnL diagrams, for example in optioncreator.
I bet your claim is wrong, and you are enjoying fooling everybody here.

 

[wxytrader]

Are you suggesting that at some point a trader could buy the 5 point box for 4.75 or sell it at 5.25??

If the call spread goes to 3,what happens to the put spread???

If the call spread goes to 5,what happens to the put spread??

Neo,now do you beleive??

What happens to the put contract if price doesn't move substantially?

 

[wxytrader]

@wxytrader, prove your claim with PnL diagrams, for example in optioncreator.
I bet your claim is wrong, and you are enjoying fooling everybody here.

You guys are missing the subtly of my argument...I'm not saying the P/L are different I'm saying the probability of P/L is different.