Replies to post #151109 on Amarin Corp Plc (AMRN)

[amarinbullfromchicago]

lets see- same call spread you can buy for $1.2 and make $7. Max loss $1.2.

put spread you sell for $5.8, need $7 margin, and can make $12.8 on it.

with $7 of capital, you can make 7/1.2*7 on the first one, so $40. its a payoff of $12.8 for put spreads, or $40 with call spreads, laying out the same capital. even if you only post 1/2 margin to sell that put spread ($3.5), its still a $40 pay off vs a $25 pay off for the put spread.

if you had unlimited money, and posting margin wasnt a concern, the payoff would be the same. but because you dont (nobody except big banks do), the margin posting for selling the in the money spreads will always make the other ones a better way to leverage your investing.

PS- you are still buying volatility. you are still buying the strike closer to at the money and selling the farther strike, meaning youre buying volatility. do you want the stock to move or stay here? if move, that means youre long volatility. selling an in the money put spread is always the same as buying that same call spread, except its almost always costs more overall.