Vertical spread risk/reward?

1 - You're right.
2 - Obvious fact now that you pointed it out, but on credit spreads, not something I ever thought about. Interesting, actually.

 

Small details... with higher IV and/or more time remaining, both legs could be ITM initially. And prior to exp, OTM spread can get there even if UL doesn't reach either strike. There's never an easy answer with these generic questions

 

The only subtle advantage is that with credit spreads, no closing costs if options OTM at expiry.

 

Chance of making a profit sometime is more important than RR ratio. Deep OTM vertical spread might give you RR up to 20:1 but that does not mean much.

 

Absolutely an untrue statement. The long term expectancy of a credit spread strategy with 100% profit potential is better than the strat with 10% potential.

IOW, ATM credit spreads vs OTM credit spreads. The long term expectancy of the ATM spreads is better under every trading scenario I could dream up.

Also, risk of such a strategy is lower and much easier to contain.

 

Trading costs eat up about 6.5% of my returns. I still look for ways to reduce it.

 

spindr0 already beat me up, gently, for this one. I understand the risk is smaller (now), but in options, as in everything else, low risk = less profit, except as these are options it also = less probability for profit.
Given that, I'm curious about your statement that ATM credit spreads have a better long term expectancy.

 

I find that if I make more profitable trades, my commission percentage decreases

 

I wasn't beating you up. I was auditioning for American Option Idol

I'm also curious about that statement.

 

Whether it is profit per trade, percentage of profitable trades or commissions per trade, I am always working to improve my performance.