If I believe a stock will go up, say from a price of $100, and I wish to execute an options strategy that would make me money if the stock were to rise, why would I want to setup a vertical spread when I could instead purchase a single naked call?
It seems to me that my transaction costs would be 2x with the spread, and while I see that time decay ( Theta ) is mitigated with a vertical spread, wouldn't the unbridled upside to unlimited theoretical profit of the naked call be better in the long run if this strategy is executed multiple times? Specifically, let's say I have a 50% chance that the stock will go up each time I execute. In that case, why not exercise the naked call each time because there's only one transaction fee?
Am I missing factors that would cause vertical spreads to be much more profitable? And if so, what would drive investors to choose one over the other specifically?