Any good strategy if I think ES will have a range of X pts

SumZero · Jul 28, 2016

If I think that ES will have a range of 40 points (or more) next week is there any good options strategy to take advantage of this assumption ?

The assumption if just for +40 points. No assumptions of which day will the range be completed or how that range will be divided above and below the opening price.

K-Pia · Jul 28, 2016

SumZero said:
If I think that ES will have a range of 40 points (or more) next week is there any good options strategy to take advantage of this assumption ?

The assumption if just for +40 points. No assumptions of which day will the range be completed or how that range will be divided above and below the opening price.

Sell weekly Call 40Pts above close.
Sell weekly Put 40Pts under close.

Amalgam · Jul 28, 2016

Wait for a 20 pt move in one direction then fade it. At worst 1:2 risk reward. Assuming 40 pt move

JackRab · Jul 28, 2016

Buy 05aug expiry straddle around 28 and maybe sell the 2120/2200 strangle... but that would limit any move beyond 40

If you stick with just the straddle, you can gamma trade around your strike... and put overnight futures orders in to capture spikes outside reg trading hours..

TradeCat · Jul 28, 2016

So what you're saying is you want to know if your guess will make you money?
Join the club!

El OchoCinco · Jul 29, 2016

Butterfly... but nothing is that easy.

atrp2biz · Jul 29, 2016

JackRab said:
Buy 05aug expiry straddle around 28 and maybe sell the 2120/2200 strangle... but that would limit any move beyond 40

If you stick with just the straddle, you can gamma trade around your strike... and put overnight futures orders in to capture spikes outside reg trading hours..

How does a long straddle and scalping gamma achieve the OP's objective? The OP wants a vol crush.

JackRab · Jul 29, 2016

atrp2biz said:
How does a long straddle and scalping gamma achieve the OP's objective? The OP wants a vol crush.

No, he thinks the range in S&P500 will be at least 40 points in the next week and wants to know how to have a profitable trade when he's correct. He says nothing about a vol crush... where do you get that from???

So if you expect 40+ point move and you can buy the straddle at below 40 point move... that will be profitable, because...

ES now: 2165
ES at 2125... 2165 straddle = 40 at expiry
ES at 2205 ... 2165 straddle = 40 at expiry

So... buy straddle below 40 and you make money if it moves beyond that.
If he thinks it will move between 2145-2185, you can still trade gamma and make money on the scalps.

atrp2biz · Jul 29, 2016

OK, I interpreted the OP differently--similar to K-Pia and OC. I read it as "within a range". So long straddle is fine and I would exit at +30% of debit. Maybe a short fly as well, but I hate 3-legged setups (since one side if so far ITM resulting in poor execution) unless you do the iron fly.

JackRab · Jul 29, 2016

atrp2biz said:
OK, I interpreted the OP differently--similar to K-Pia and OC. I read it as "within a range". So long straddle is fine and I would exit at +30% of debit. Maybe a short fly as well, but I hate 3-legged setups (since one side if so far ITM resulting in poor execution) unless you do the iron fly.

Okay. Vol crush isn't really likely at these IV levels though... so he would be left with a theta capture with short gamma. And with 40 point move, short gamma doesn't sound very appealing to me.
Yeah I though of a short fly as well... but that limits your gamma play.