Profit-Loss ratios on spreads vs. nakeds

Quote from spindr0:

All you have done is determine how many of the lower priced position you can do for the cost of the higher priced position. That's not risk/reward or PnL. It's just equivalent risk.
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Thanks for the clarifications. I think I would rather side with the old timer's dual usage of the term "naked". :)
 
Quote from optionsgirl:

Thanks for the clarifications. I think I would rather side with the old timer's dual usage of the term "naked". :)
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Calling me an old timer is one of the nicer things said about me lately. :eek:
 
i'm not sure the math you are doing actually mean anything. i'm not sure how comparing the 15-16 put spread to the 11-12 put spread are telling you anything.

the 15-16 put spread is slightly out of the money, but has a reasonable chance to expiring in the money. especially considering the range for the XLF. the 12 strike is over 25% away.

if you think the xlf is going lower but don't want to just spend the premium on the 16 put, you can buy the 15-16 put spread. if you want to spend even less money, you can sell the 11-12 put spread against it to lower your net premium paid out.
 
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