Option Spreads, Credit my Debit Message Board

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Strategies & Market Trends : Option Spreads, Credit my Debit

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To: Richard Nehrboss who wrote (922)	9/22/1999 4:28:00 PM
From: KFE	Read Replies (1) of 2317

Richard, MSFT surpassed a 10% gain 38.4% of the time over the last year in a 20 day trading cycle (that is 89 times out of 232 cycles). This means that a 100-105 call credit spread has just under 40% chance of quadrupling your money for the Oct expiration. If the odds of a quadruple were 25% you'd be even , at 40%, you have %160 on your investment. If you could post the actual prices of the options involved it might be easier for me to understand the concept. I can't see how how you can "quadruple your money" on an OTM credit spread. It is difficult to figure your return on investment in credit spreads because you are usually trading against equity already in the account. You are not adding additional funds or creating a margin debit. I think that Ron is doing something similar to you with probabilities, maybe he can help you. Remember that an options delta is also considered the probability that it will expire in the money. Regards, Ken

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