2014 option challenge

Should I buy deep OTM spy call?

  • Yes do it

    Votes: 13 61.9%

  • You're nuts

    Votes: 8 38.1%
  • Total voters
    21
  • Poll closed .
S

stock_trad3r

With the market up 29% this year I'm contemplating putting a large $ portion of my account in far OTM Jan 2015 SPY calls in anticipation of another huge year. A 30% return is just 1.22% a month.


contemplating the $220 strike @$.55

http://finance.yahoo.com/q?s=SPY150117C00220000

or the $215 @ $1

http://finance.yahoo.com/q?s=SPY150117C00215000

A 30% rally would be $240

How much money could I make? $10k risked in the later would become $240,000 should spx rise 30%

I included a poll as well...should I do this on Monday or not?
 
Quote from stock_trad3r:

With the market up 29% this year I'm contemplating putting a large $ portion of my account in far OTM Jan 2015 SPY calls in anticipation of another huge year. A 30% return is just 1.22% a month.


contemplating the $220 strike @$.55

http://finance.yahoo.com/q?s=SPY150117C00220000

or the $215 @ $1

http://finance.yahoo.com/q?s=SPY150117C00215000

A 30% rally would be $240

How much money could I make? $10k risked in the later would become $240,000 should spx rise 30%

I included a poll as well...should I do this on Monday or not?
More...

Hey skippy, your math is off by a mile. LOL.
 
I am not sure about going and finding the data but it would be interesting to know how many consecutive years the market (S&P500 in this case) has performed >25%+. Is it unheard of or does it happened often? In any case, it would be amazing to me if the market performed back-to-back 25%+ years.
 
Quote from Maverick74:

Hey skippy, your math is off by a mile. LOL.
More...

the math is correct

100 contracts = control of 10,000 shares

240-220 = 20*10,000 = 200,000 or ~ $194,000 profit

240-215 = 25*10,000 = 250,000 or $240,000 profit
 
162 contracts ~ about $90,000 potential with a run to 215

Quote from stock_trad3r:

the math is correct

100 contracts = control of 10,000 shares

240-220 = 20*10,000 = 200,000 or ~ $194,000 profit

240-215 = 25*10,000 = 250,000 or $240,000 profit
More...
 

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I saw last price Jan 2015 220 SPY calls at .67, so could maybe buy 150 calls on a little lower limit price with $10,000.

SPY at 240 would give about $2000 profit per option; $2000 times 150 is $300,000.

But I don't know where you got the "30% is just 1.12% a month" idea.
 
This challenge should be a breeze because the trade is structured to not fail

first I will buy 100 contracts of 220 SPY Jan 2015

http://finance.yahoo.com/q?s=SPY150117C00220000

this should cost $6700 or so

My target is $240 for end of year

Profit is $194000 if it succeeds (could be more but unlikely)

Now I need some way to hedge the potential loss

My solution is to simply short the Turkish Lira which will crater on the smallest hint of trouble in Europe, inflation taper etc. So on my forex account I will leave my $200,000 USDTRY open. The rollover fees are kinda high but as I said on the smallest whiff of trouble this pos Turkish currency will tank and I will make $4000+ in a few days like I already did a few weeks ago. I can just close the position at that instance and have enough to cover the SPY calls premium.

Finally, I still want the possibility of making money if the market rises (but not enough to meet my strike) and my SPY and USDTRY cancel out, so I'm going long 2000 of the MOAT etf which works out to about $56,000. A 10% rise in the market is $5,600 profit on that trade. 20% is 11,200.

The worst that can happen is the market and USDTRY is flat and I lose $6700 on calls and bleed $ on swaps but this is very unlikely because turkey is hyperinflating and full of corruption so it's only going to get worse. Also the central bank will not raise rates. It's like having the opportunity to short reichsmarks during the weimer republic.
 
update: up 40% on my 65 contracts of jan 15th $65 XLV calls

I ditched SPY calls seeing that XLV not only has LESS implied volatility than SPY but better returns.

once these go ITM i'll effectively be long 6,500 shares at a cost of around $2700
 
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