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Most traders obsess over squeezing every last cent out of a trade. I get it — we’re all here to make money. But there’s something more valuable than a marginal pricing advantage, and it’s the clarity that keeps you from making costly mistakes.
Every strategy involves a trade-off between reward, risk and the probability of winning. In this case, I favored the setup with a high probability of success and a clear, manageable outcome rather than chasing a small theoretical edge.
Let me walk you through a comparison that perfectly illustrates this point. I was looking at the S&P 500 (SPY) and comparing two equivalent structures at the $767 and $768 strikes — a bull call spread for a debit and a bull put spread for a credit.
When Nearly Identical Setups Reveal What Really Matters
The bull call spread showed a 16-cent debit, meaning $16 of maximum loss and $84 of maximum profit per contract. The bull put spread showed a 15-cent credit, meaning $85 of maximum loss and $15 of maximum profit. Their expiration payoffs were economically similar — only a dollar apart.
After refreshing the quotes, the calls turned out to be just a tiny bit better. So there was no real advantage in using the credit spread at all.
But here’s what matters most…
Even if the credit spread had a 50-cent or $1 advantage, I would still choose the debit. It’s easier to evaluate, easier to calculate and easier to track from a profit-and-loss perspective.
When I look at a debit spread, I instantly know what I’m in for. I don’t have to undo any of the broker’s confusing calculations. The profit and loss is straightforward — no mental gymnastics required.
That simplicity is part of a broader trading philosophy. I’d rather trade something I can manage cleanly than chase marginal advantages that create operational friction.
A small edge on paper is not always an edge in practice.
The Hidden Costs of Credit Spreads Nobody Talks About
Beyond clarity, there’s another reason I generally favor debit spreads…
Less concern about early assignment. A bull put spread includes a short put that can be assigned before expiration. A bull call spread still has a short call, but early assignment is generally a concern when that call is in the money, particularly near an ex-dividend date.
The main thing I need to monitor is expiration. If SPY is close to either strike, I’ll manually close the position rather than hold it through expiration. If SPY finishes between $767 and $768, the long $767 call may be exercised while the short $768 call expires worthless, potentially leaving me with shares.
If SPY finishes above $768, both legs are in the money and their exercise and assignment should offset. Even then, closing the spread removes unnecessary expiration and after-hours price risk.
This is what separates theoretical edge from practical execution. If an extra dollar costs you clarity, increases operational complexity and introduces assignment risk, is it really worth it?
For me, sustainable trading means prioritizing positions I can understand and manage consistently. That’s the kind of decision-making that keeps you in the game long term.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
P.S. The Bullseye Effect In the S&P 500 Is Changing Everything!
I recently went on camera with former hedge fund manager Roger Scott to expose a stunning discovery on the S&P 500…
Tipping off some of the most lucrative end-of-day trades market-wide!
Fair warning: You’re in for a stunner!
