Delta, the positive and negative

I came across a misconception about the deltas for puts and calls.  Someone put forth that a Sept. expiry Bull Call Spread on AAPL was the same as a Sept. expiry Bull Put Spread with similar strike prices.  In fact, the two strategies are diametric opposites.  That is because calls and puts do NOT have the same deltas, even when accounting for the fact that put deltas are represented by a negative number.  So, the AAPL Sept. 710 call has a delta of .0159 and the Sept. 730 call has a delta of .0000.  Since a Bull Call Spread is a debit spread, the cost for this spread is tiny, $.10 x .02=$.08 per contract, or $8.  The same strikes for the AAPL Sept. puts are 710 delta of -.9786 and the 730 put delta is -.9942.  Since a Bull Put Spread is a credit spread, the credit received would be $18.50 on a $20 spread, i.e., $1850 credit for every $2000 margin (but the "real" or effective margin is only $150=2000-1850). 

But, and this is a HUGE but -- with September expiry, you are giving no time at all for the stock to move.  Sept. expiry has an enormous theta influence (meaning time erosion).  If you buy the Bull Call Spread, it would cost you nearly nothing ($0.08 or $8 per contract), but the likelihood of that spread rising are almost nil, zero, zilch.  You know why?  Because the delta is 0.  The delta determines how much the option will move for every $1 move in the underlying stock.  With a delta of 0 and only 3 weeks to expiry, you would need a miracle for your $8 to go anywhere.  Of course, $8 is not a lot of money, so you may want to play with it.  But that would represent the true analogy to a lottery.

As for the Bull Put Spread, even though the credit is enormous, the Sept. expiry still poses a problem because of its short nature.  Yes, the deltas are huge (and are represented with a negative sign), which imply just about a 1:1 move of the options for every $1 move in the stock, but again, you are giving a very short time for the stock to do anything.  Very risky.

I am in the process of writing a book on this.  Stay tuned, if you're at all interested