When to sell a put spread versus long a call spread?

If you compare the parity trade they are virtually identical - otherwise, there would be a profitable box. Differences can be minor and the American box would be riskless if there is no dividend. Draw the payoff of both strategies and you'll see. The 100/90 bull put is identical to the 90/100 bull call otherwise there would a material arb. opportunity.
 
Riskless for a no dividend American box is a bit too brief - my bad. Dividend or not there is no rule against noneconomic early exercise. Depending on what got exercised early there would still be the overnight risk and depending on which side got hit - that could create a problem or be a favorable event.
 
tommo said:
Thats just an iron condor isn’t it? Why would I sell the call spread if I was bullish?
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I am not arguing for or against @Saltynuts' trade. I just like to see someone giving suggestion that I personally have not thought of. Make me think harder on the problem you presented.

And it works under certain situation.
 
ajacobson said:
If you compare the parity trade they are virtually identical - otherwise, there would be a profitable box. Differences can be minor and the American box would be riskless if there is no dividend. Draw the payoff of both strategies and you'll see. The 100/90 bull put is identical to the 90/100 bull call otherwise there would a material arb. opportunity.
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Perhaps the same reason we approach selling covered call different than writing naked put and my broker only approved me to trade covered calls and nothing else at the beginning?

Is parity for debit bull call spread and credit bull put spread at the same strike or equal OTM strikes or both?

Thanks.
 
ironchef said:
I understand selling put spread as a bullish bet because I need wing protection. I never understand buying a call bull spread.

Long call caps my loss, why do I also want to cap my gain with a spread? Buying OTM calls has < 50% win rate so I need high reward potential to make it worthwhile.

I have not done any analysis or test to validate call vs call spread so it is just an untested opinion.
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Hi Iron
Hopefully, I can help with a test of your untested opinion of call vs call spread. I have above tested a call spread where we saw a slightly positive 0.21% annualized return. The long call with default values of 30 days to ex and 30 deltas is below. The backtest shows an annualized loss of -0.11% with a win rate of 34%. The call spread had a 38% win rate. The best p&l was higher for the call at $1451 vs $525. The call drawdown is worse 31% vs 17% as is the volatility 5% vs 3%.

b28d7aa3cfda70beef9fca6758f210c0.png

https://gyazo.com/b28d7aa3cfda70beef9fca6758f210c0
 
Matt_ORATS said:
Hi Iron
Hopefully, I can help with a test of your untested opinion of call vs call spread. I have above tested a call spread where we saw a slightly positive 0.21% annualized return. The long call with default values of 30 days to ex and 30 deltas is below. The backtest shows an annualized loss of -0.11% with a win rate of 34%. The call spread had a 38% win rate. The best p&l was higher for the call at $1451 vs $525. The call drawdown is worse 31% vs 17% as is the volatility 5% vs 3%.

b28d7aa3cfda70beef9fca6758f210c0.png

https://gyazo.com/b28d7aa3cfda70beef9fca6758f210c0
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Thank you sir for doing the hard work for me.
 
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