Why would the spreads be worse?
Using puts as the example - a credit put spread (aka BPS) is more dangerous as compared to cash secured puts. With increased risk comes increased returns as well, aka leverage.
Assuming a $100 wide spread, as an example, an -900/+800 put spread. That's about $20 OTM at this moment. If the shares drop $50 down to 879, this put spread is now $30 ITM on the short leg, and if held to expiration with no further share price changes, will lose $30 against $100 at risk for each spread. That's a 30% loss.
If that had been a cash secured put at the 900 strike, shares at 920, the $50 drop to a $870 share price and held to expiration still yields a $30/share loss, or $3k. The difference is that instead of reserving $10k for the position, you reserved $90k for the position. So the loss was about 3% ($3k/$90k) instead of 30%.
Another way to think about it - with a put spread you achieve a max loss at the insurance strike ($800 in my made up example). In a cash secured put you achieve a max loss at its insurance strike ($0
). Even going bankrupt will still, most likely, not result in a max loss on a cash secured put - Tesla has technology, brand, and capital assets worth more than $0. Bankruptcy will also be unlikely due to the lack of leverage in the business at this moment, where leverage = borrowed money and unfunded liabilities (pension obligations being most common).
After being burned really badly at the beginning of the year (losing $130 on a $150 wide spread) I went with CSP exclusively for a couple of months. The absolute returns were pitiful compared to what I'd been getting with BPS last year, but they were also completely adequate for my income needs, which made it a lot easier to back down to zero leverage on the puts.
My new balance point, starting last week, is I'm putting BPS on again. But I'm sizing the positions using CSP as my reference point. My decision making amounts to how many CSP could I sell, and then sell as many as 2x as BPS, but no more. With so few BPS I can use a really wide spread and still leave uncommitted cash laying about. Here I'm choosing the insurance put based more on its price, so this week has been 800 and 750 puts, using 500 strike puts as the insurance (like $0.20 for the insurance).
I've still got a significantly higher chance at a max loss as I only need the shares to drop to $500 (by end of next week) for the max loss to happen (compared to $0 for the max loss using cash secured puts). Leverage always comes with risk; this is a level of risk I'm comfortable with, consistent with my dividend-like income objective.