http://finance.yahoo.com/news/caterpillar-global-dealer-machinery-monthly-212517060.html http://www.msn.com/en-us/money/stockdetails/financials/fi-126.1.CAT.NYS http://stockcharts.com/h-sc/ui?s=cat Trade: with CAT at 76.29 Jan '17 77.5/75 bear put spread for a net debit of $140 Yield = 110/140 = 78.5% in 213 days Prob =51% Expectation = .51(110) - .07(140) - .42(70) = 56.1 - 9.8 - 29.4 = 16.9 Price............ Profit / Loss...... ROI % 56.25............. 110.00.............. 78.57% 64.05............. 110.00.............. 78.57% 72.25............. 110.00.............. 78.57% 75.00............. 110.00.............. 78.57% 76.10................. 0.00................ 0.00% 77.50............ (140.00)........... -100.00% 80.46........... .(140.00)........... -100.00% 88.67............ (140.00)............ -100.00% 96.88............ (140.00)............ -100.00% Trade#2 Jan '17 80/82.5 bear call spread for a net credit of $86 Yield = 86/164 = 51.4% in 213 days Prob = 62.3% Expectation = .623(86) - .32(164) - .06(82) = 53.6 - 52.8 - 4.9 = -4.1 Price............. Profit / Loss........... ROM % 57.20................ 86.00.................. 52.40% 66.01................ 86.00.................. 52.40% 75.29................ 86.00.................. 51.40% 80.00................ 86.00.................. 52.40% 80.86.................. 0.00.................... 0.00% 82.50............. (164.00)................ -100.00% 84.57............. (164.00)................ -100.00% 93.85............. (164.00)................ -100.00% 103.13........... (164.00)................ -100.00% The yields and risk on these two trades are quite similar. The small point spread (2.5 points) impairs accuracy and these two trades are prob not really different from each other. What's the point? There are a lot of people who are very dogmatic about some types of trades being more risky and/or more profitable than other types. It really isn't true. If it were true traders would flock to the more profitable strategies thus adjusting prices until the difference disappears. It's more important to be comfortable with and understand the strategy you are using and be competent managing the trade. Also it demonstrates that choosing the underlying is much more important than the trading strategy you choose. In the trades shown above it's much more important to correctly judge the short term future of CAT than any trading finagle you might come up with.