Defined-risk trades have some major benefits including reduced capital requirement, fixed maximum profit / loss and easily calculated POP. Also, we don't have to manage losing defined-risk trades because current loss improves Risk/Reward Ratio .
Defined risk strategies can largely reduce BPR. For example, the BPR of a 39 DTE Straddle on SPY (undefined risk trade) is about 7 times larger than an Iron Fly with 16 delta wings (defined risk trades).
The maximum profit and loss are fixed because the maximum profit is the credit we collect and the maximum loss is the difference between spread width and credit.
And for the credit spreads we talked about today, the probability of profit can be easily calculated as 100 - [(the credit received / spread width) x 100].
Tune in as Tom and Tony expand on all of these points!