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 .
This is pure genius. A brilliant way to make sure money.

Seriously, I would suggest learning the basics of options. Certain factors greatly influence their price, such as volatility and time to expiration.

If you want to buy the market, why not just put your cash in a margin account and buy the SPY. Then you would be better served by selling those calls you mentioned.
 
Even if it did, let's say the OP is long the SPY Jan15 220 calls. What happens if SPY closed at 219.99 by expiration? He loses all of his money, even though he nailed direction.

If you really want to buy straight premium, go ITM, like 90-delta or so. That way you'll somewhat mirror the underlying.
 
Quote from stock_trad3r:

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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How is a healthcare ETF a proxy for the stock market? If anything, it would probably fare better (than other sectors) in a market downturn.

Regardless, the same issue exists in any underlying asset: Do you really think buying a far otm call is the best way to position yourself to profit from the stocks direction?
 
Quote from Doobs789:

How is a healthcare ETF a proxy for the stock market? If anything, it would probably fare better (than other sectors) in a market downturn.

Regardless, the same issue exists in any underlying asset: Do you really think buying a far otm call is the best way to position yourself to profit from the stocks direction?
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Healthcare is close enough and the lower volatility coupled with higher returns seems like a win-win. 99% of the time it's the other way around- higher returns and more volatility.

I'm emphatically bullish about the stock market in general, so I still want to make money even if my calls expire worthless so I added some deep in the money calls worth around 23,000

BinpRuq.jpg


If XLV goes to 60 I will make approx $7-8k with these options and lose the 65's leaving me with $5k or so. But $60 is just 5.8% away and it has all year to do it.
 
Quote from stock_trad3r:

Healthcare is close enough and the lower volatility coupled with higher returns seems like a win-win. 99% of the time it's the other way around- higher returns and more volatility.

I'm emphatically bullish about the stock market in general, so I still want to make money even if my calls expire worthless so I added some deep in the money calls worth around 23,000

BinpRuq.jpg


If XLV goes to 60 I will make approx $7-8k with these options and lose the 65's leaving me with $5k or so. But $60 is just 5.8% away and it has all year to do it.
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Time is not on your side. You want it to get there in a hurry.

Why not just buy the underlying and sell calls against it? Or create some sort of spread, like an upside fly.

Better yet, sell puts every month. If expired worthless, repeat. If assigned shares, sell 2 30 delta calls against every 100 shares. If it trades to your neutral strike, fly it off and generate some theta.

There are a million ways to do this. Sure, you can be long calls and hit a homerun, but I'm sure any trader here would be happy to sell you those calls.
 
the premiums are so low because the volatility is very low not worthwhile . Writing a Jan 15th 2015 $55 call would give me about $2.3 per contract assuming it stays flat or a 4% YOY return
 
Quote from stock_trad3r:

the premiums are so low because the volatility is very low not worthwhile . Writing a Jan 15th 2015 $55 call would give me about $2.3 per contract assuming it stays flat or a 4% YOY return
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I am not saying that XLV is the ideal candidate for this strategy, nor would I sell that option. I am just offering a way to make decent returns, if you are bullish direction and happen to be right. Why buy a straight otm call when you can finance a long position by selling more near term contracts (one month out perhaps).

If you can't get much for XLV options due to low vol or whatever, how about picking one of the constituents of that index? Say, AMGN. Sell some 110 or 115 puts, keep the money if it goes up. If assign sell some 125 strike calls like 2 months out, and repeat. If you want to get fancy you can position yourself long/short constituent vol/price, and then go to the basket to hedge. I have done this same strategy recently with AGN. I generated a lot more cash than if I was just holding onto a lotto ticket hoping it hits, while decaying every day.
 
getting my butt kicked today

this stock market refuses to go up. it's been negative for the whole year. Had I stuck with my original plan to sink $10k in OTM calls I would have lost about 40% of it as of now. thankfully the XLV OTM calls still have a gain.

Up 105% on my turkish lira short. pretty much all my gains come from that and little from anything else
 
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