You are spot on. No one will disagree that the p&l on a one way move isn't better with the naked but it is all about probability of success over a number of trades. If I knew SPX was going to jump up 20 pts tomorrow, of course I would buy a call.
OK ...That's a good example and time frame. My numbers are slightly different but it won't affect the outcome. 1950/1955 at $1.65 1950 at $2.85
UPDATE: Comparing the debit spread to a long only position. After 1 day 1950/1955 call debit spread bought at $1.65, can be closed for $0. P/L -$1.65 -100% 1950 call bought at $2.85, can be closed for $0.10. P/L -$2.75 -96% Commissions not included. The short option does nothing to prevent a loss, but it will cap the gains if the underlining has a good run in your direction. If you want to reduce the $$$ exposure instead of the 1950/1955 call debit spread buy just the 1955 call.
Wow, pretty twisted logic there. First you aren't getting .10 for that option and I am not closing it for 0 so let's just say they both go out worthless ok? What you are neglecting is that you invested $285 vs. my $165 so who really came out ahead? Yes I capped my profit because I didn't think we could get above 1955. You really think the long option buyer is holding on to that option if we had a huge gap up and theta is eating away at their profit?? Sorry, your logic just doesn't hold up but thanks for trying.
The values I posted are what the current bid/ask is at. Obviously nobody would close them at this time. Both positions are at 100% loss, nobody came out ahead. If you want to reduce the dollar exposure just buy an option 1 strike further OTM. A debit spread isn't the way to save money. I don't know what the buyer would do, that's a scenario that didn't happen.
You are the one that first mentioned the debit spreads in post #7 and you came up with the OTM SPX 1950/1955 call debit spread. Not me. In response to your post I was just pointing out that debit spreads isn't a good way to reduce risk and the outcome of the SPX 1950/1955 debit spread that you posted showed that.
There is no "outcome" until expiry. You have to hold spreads to expiry -- their value can snap quite a bit at the end of life. This is a useless comparison (so far).
I lost a lot less than you did on the 1950 call because it was hedged, so in fact the spread I posted proved that point exactly. YThe reality is you lost $285 and I lost $165 simple as that. Moving further out to pay less for a single option means you have even less of a chance of it being worth anything. And that gets back to my point, I am not saying the single option doesn't have the "potential" to make more, it is all about probabilities over a larger number of trades. Remember, you are the one saying verticals are useless I am not the one saying single options are useless. Anyway, that is enough of beating this dead horse.