How to determine ROI for Bullish Put Spread?

[oemOptions]

 

I would like to know on how to determine ROI for Bullish Put Spread.

For Sell Put 100, ROI is simply premium / Strike Price

For Bullish Put Spread = Sell Put 100 + Buy Put 90

Max Profit is $4

Max Lose is $10

Does anyone have any suggestions?
Thanks in advance

 

 

[zxcv64]

Max profit is : $4

Max Loss is : -$6

 

ROI will be worked out at the time of close - say you open for 4, and close the trade by buying back the put spread for 1.5, then your net profit is 2.5, and this gives an ROI of

2.5/6 = 42%

 

[Kim]

For more details, you can read How To Calculate ROI On Credit Spreads

 

[rasar]

16 minutes ago, oemOptions said:

 

I would like to know on how to determine ROI for Bullish Put Spread.

For Sell Put 100, ROI is simply premium / Strike Price

For Bullish Put Spread = Sell Put 100 + Buy Put 90

Max Profit is $4

Max Lose is $10

Does anyone have any suggestions?
Thanks in advance

ROI for Credit spreads is calculated as described in this article.

In short, being a credit spread, ROI is calculated based on margin requirement (your investment).

The margin requirement is (Spread Width -Credit Received) x 100.

[rasar]

1 minute ago, Kim said:

For more details, you can read How To Calculate ROI On Credit Spreads

 

🤐 I'll have to check my system for trackers 😂

[oemOptions]

13 minutes ago, zxcv64 said:

Max profit is : $4

Max Loss is : -$6

 

ROI will be worked out at the time of close - say you open for 4, and close the trade by buying back the put spread for 1.5, then your net profit is 2.5, and this gives an ROI of

2.5/6 = 42%

 

 

Case 1

For Sell Put 100, ROI is simply premium / Strike Price

Max Profit is $8

Max Lose is $100 with probability 3%

How to determine ROI?

Case 2

For Bullish Put Spread = Sell Put 100 + Buy Put 90

Max Profit is $4

Max Lose is $10 with probability 33%

How to determine ROI?

I would like to compare on which ROI is higher with considering probability.

Do you have any suggestions?
Thanks, to everyone very much for any suggestions (^v^)

 

 

[Kim]

 

• Risk Reward Or Probability Of Success?
• Calculating The Probability Of Option Payoff
• Option Payoff Probability
• Probability And Option Risk

Risk/reward and probability of success always have reverse relationship. High probability of success means lousy risk/reward (you risk $8 to make $2).

Generally speaking, 50% probability typically translates to 1:1 risk/reward (risking $5 to make $5). 

 

[oemOptions]

For Bullish Put Spread, if ROI is determined by 2.5/6 = 42% without considering probability.

I think this calculation is playing trick on math without considering probability, so I get no idea on how to compare ROI between Sell Put vs Bullish Put Spread in order to determine on which one is better.

Do you have any suggestions?
Thanks, to everyone very much for any suggestions (^v^)

[Kim]

@oemOptions I would suggest reading the articles that we posed links to. They should provide you with the information you need. for more educational articles, please visit our Education Center

Education Center

[oemOptions]

Thanks, to everyone very much for suggestions (^v^)

[oemOptions]

I would like to know the Pros and Cons between Sell Put vs Bullish Put Spread.

Which one is better under different situation?

 

Does anyone have any suggestions?
Thanks, to everyone very much for any suggestions (^v^)

 

 

[Ringandpinion]

1 hour ago, oemOptions said:

Does anyone have any suggestions?

Lots of educational stuff out there that is legit.  Everything I've read on the SO site has been really good.  For the real basics, the OIC or Options Industry Council has some great webinars and educational stuff, if you have the patience for webinars.  The only books on options I've really studied were the Options as a Strategic Investment, this can be used as a text book, reading what you understand and working your way through it.

 

1 hour ago, oemOptions said:

I would like to know the Pros and Cons between Sell Put vs Bullish Put Spread.

Your question is a very basic one, so you need to do some education on options.  Any naked short option is an altogether different critter than a vertical spread, shorting puts looks easy until you misjudge or worse, don't take a nasty loss to prevent an overwhelming one, then you get your hat handed to you.

[oemOptions]

Thanks, to everyone very much for suggestions (^v^)