However it's been over 45 years since I've really worked with statistics and I'm finding out that Options are all about stats.

So I didn't completely follow your math in comparing the 2 different risk:reward option scenarios.

Please see the table at the end of my question to see how I have come up with my numbers.

It appears to me that both scenarios have an expected profit of $1.60. This is the probability of success times the max spread.

Therefore the spread with the 20% probability of success is expected to have an 80% profit while the option with the 80% probability of success is expected to have only a 20% profit.

The option with the 20% chance only needs to move 40 cents (5% of max move) to make a 20% profit where the other option has to move 80% of the max to earn a 20% profit.

So with my fuzzy math, I would have also gone with the option with only the 20% chance of success.

Can you help me see what I'm missing?

Risk/ Max $ Prob of Expected Profit/

Reward Cost Spread Profit Success Profit Cost

----- ------- --------- ----- ------- -------- ------

1:4 $2 $10 $8 20% 1.60 80%

4:1 $8 $10 $2 80% 1.60 20% ]]>

However it's been over 45 years since I've really worked with statistics and I'm finding out that Options are all about stats.

So I didn't completely follow your math in comparing the 2 different risk:reward option scenarios.

Please see the table at the end of my question to see how I have come up with my numbers.

It appears to me that both scenarios have an expected profit of $1.60. This is the probability of success times the max spread.

Therefore the spread with the 20% probability of success is expected to have an 80% profit while the option with the 80% probability of success is expected to have only a 20% profit.

The option with the 20% chance only needs to move 40 cents (5% of max move) to make a 20% profit where the other option has to move 80% of the max to earn a 20% profit.

So with my fuzzy math, I would have also gone with the option with only the 20% chance of success.

Can you help me see what I'm missing?

Risk/ Max $ Prob of Expected Profit/

Reward Cost Spread Profit Success Profit Cost

----- ------- --------- ----- ------- -------- ------

1:4 $2 $10 $8 20% 1.60 80%

4:1 $8 $10 $2 80% 1.60 20% ]]>