I just wanted to get a second opinion on this.
In terms of the payout that one would receive, is there any difference between
(i) long call option
(ii) bullish credit spreads (i.e. bull call/put credit spreads)??
My feeling is that the delta around the strike is higher for the credit spreads, and that the penalties for being slightly wrong with an underlying price hovering around strike is less for the bull call/put spreads, as an underlying that hangs around slightly above the strike is more profitable than with a long call option.
Also sometimes the premium paid for a long call can be so high that it is much better to do the bull call/put strategy.
But couldn't we compensate the shortfall in the long call's profitability by establishing a long call that is deeper in the money so that the strike price is a bit lower and hence more profitable if the underlying price ends up comfortably above the strike??
I don't know why, but the profitability and return on capital of a bull-put or bull-call spread is usually always higher than a plain vanilla long call option IF the premium paid for the long call is either similar in value to potential loss of the bull-put/call or high in general.
I can definitely see a difference between a long call vs. credit spread where there is heaps of volatility and the price of the underlying goes up way above the strike (i.e. long call = unlimited profit), however for a low volatility situation where the underlying closes just slightly above the strike, usually always ... the bull put or bull call credit spread has a higher return on capital.