Are options a "bad bet" long term? My math indicates they are and I'm truly hoping someone can meet the challenge and PROVE me wrong. Long term performance can be evaluated in terms of trade return on investment expectation. Here is how trade ROI expectation is calculated: Expected profit/loss ($$$) per trade divided by investment amount Let me provide an example to clearly explain the problem I am finding with option positions. I'll use a real life example of selling a SPY Iron Condor (using 2 pt spreads). The trade quote info comes from the Thinkorswim platform 6/12/10. Relevant Data: The position - SPY Jul 10 (expiration about 5 wks) sell 114 call, buy 116 call, sell 104 put, buy 102 put Credit received: .89 or $89 for the 100 shares per 1 contract Probability of expiring at break even or above: 45.52% Commission to enter trade: $11.80 Profit Potential: $77.20 (credit received minus entry commissions) Risk/Margin/Investment: $122.80 ($111 margin requirement + entry commissions) Ok, that's the position and the data. To see if this (or any) trade is a good bet (profitable long term), one must determine how one would do if the trade were made many, many times. If this trade were made 100 times, one would expect to win the profit potential 45.52 out of the 100 times... 45.52 x $77.20 = $3,514.14 total winnings And one would lose their investment of $122.80 54.48 times out of the 100 times (100 - 45.52). 54.48 x $122.80 = $6,690.14 total losses So if this trade were made 100 times, what would be the total EXPECTED PROFIT/LOSS.... $3,514.14 - $6,690.14 ___________ - $3,176 total expected loss Which provides an expected profit/loss per trade of -$31.76 (total loss divided by the number of trade, in this case 100). This per trade profit/loss is then divided by the investment of each trade ($122.80) to determine the per trade expected return on investment. -$31.76 divided by $122.80 = -25.86% !!!! And therein lies the problem. Every credit spread or option position I evaluate produces a NEGATIVE expectation. And that means the position is a bad bet because it will lose money long term. Closing a position early doesn't solve the problem, it only makes it more complicated to calculate and even compounds the problem. So here's my challenge... Where am I wrong? What am I missing? The only way to make money long term is to engage in trades with a positive (not negative) expectation. If there are no option trades with a positive expectation (and I've yet to find one), how does one overcome the negative expectation and make a trade positive?? With all due respect, I'm NOT looking for personal opinions or one's personal trade experiences. If you can't quantify it down to a definable trading situation that can be objectively evaluated, then one can't duplicate it for future benefit. It is all about numbers. It is about gaining an edge (positive expectation) and then profiting from it. I would greatly appreciate any quality input.