I've been trading stocks for a number of years and options over the last couple of years (but always simply buying calls, or doing simple spreads). I am a very conservative trader and I'm always looking for a way to minimize risk (aren't we all?). I've been testing a theory and everything seems fine except for one thing. I've used a trading system, tweaked here and there, over the years that goes long with a profit target and no stop loss (only a time based exit). I trade stocks with a low beta and haven't been bit, but having no stop loss always bothers me, even though I put less than 10% of the account on any given trade. Here's my question. Let's say I were to substitute the underlying with a synthetic long instead. Now I want to put a collar around my synthetic to manage risk. Since I already have a hard profit target, and no stop loss, this collar will provide me with a way to have a stop loss (and profit target) but not get snuffed out of the trade. Let's take PEP for example, which closed today at 64.73. If I were to do a synthetic long with a collar, I have some choices. Using theoretical for now, I could B JAN07 67.50 Call @ 1.10 S JAN07 67.50 Put @ 2.60 S JAN07 70.00 Call @ 0.45 B JAN07 65.00 Put @ 1.30 for a credit of about 0.70 (rounding may make this more or less). According to my calculations, my maximum profit is 2.93 and my max loss is 1.80. If I turn around and do this close to the money, I see this: B JAN07 65.00 Call @ 2.20 S JAN07 65.00 Put @ 1.30 S JAN07 67.50 Call @ 1.05 B JAN07 62.50 Put @ 0.50 for a debit of around 0.35 and a max profit of 2.16 and a max loss of 2.84. This seems a bit too good to be true. I surely don't get a higher R/R just because of the different strikes? What am I missing here?