Best options strategy for a 1 or 2 dollar gain within 5 days ?

atticus · Jul 31, 2010

Quote from chuckybrown70:

surprised there is no str forward answer, so i will help, but in return i want u to pm me your picks so i can see how they do.... agreed?

the way to play it is buy deep in the money puts or calls. in the closest month. you will see the premium is the lowest there. probably only a nickle. the delta is close to 100, but if the trade goes against u, u dont lose 1 : 1 u lose less, and if it goes for you, u will gain close to 1:1.

if you want me to explain why the other strategies mentioned in this thread are wrong, pm me, and i will. but the pm need to have a call or two. i wan to see what you are doing and if it makes sense. thanks, enjoy

DITM was mentioned on page two. Now why are the other strategies wrong?

zdreg · Jul 31, 2010

Quote from Range Rover:

I predict that a stocks price will rise 1 or 2 dollars within 5 days,what option strategy would the option experts use to profit from this play ?

My stop would also be 1 or 2 dollars

your premise is a fatal error. you should not be predicting. the market should be telling you what to do.

iloveoptions · Jul 31, 2010

Quote from Range Rover:

I predict that a stocks price will rise 1 or 2 dollars within 5 days,what option strategy would the option experts use to profit from this play ?

My stop would also be 1 or 2 dollars

With the recent intro of weekly options on highly liquid stocks, vertical debit spreads are most likely the best option strategy for what you're trying to accomplish since they also expire in 5 trading days. The long side of the vertical should be slightly in the money, while the short side slightly out of the money. If you pay no more than 1/2 the maximum value of the spread (that's when the price of the underlying is at or beyond the short side of the spread), and the underlying finishes there at expiration, you'll end up with a 100% return while having a 1:1 R/R profile on your position. It's a beautiful position when structured properly that allows the trader to sleep better at night.

tradingjournals · Jul 31, 2010

Quote from Range Rover:

Lets say I expect AMZN to rise 2 dollars from its current price within the next five days. I will take profits if it gos up 2 dollars within 5 days.I will exit trade if it drops 2 dollars within 5 days . I will exit at the current price at the end of 5 days if it hasn't gone up or down 2 dollars within the 5 days.

I'm am using options to increase buying power

I have studied the exact problem you are dealing with, and I have devised solutions to the problem. There is one piece of information you did not provide and which determines which solution is "best". The missing information: from your experience what is the percentage of trades that reach a 2 dollars profit, and what is the percentage of trades that reach a 2 dollars loss? If you do not have a precise answer, an estimate based on your judgment of those two numbers would be fine.

joesan · Jul 31, 2010

Quote from iloveoptions:

If you pay no more than 1/2 the maximum value of the spread (that's when the price of the underlying is at or beyond the short side of the spread), and the underlying finishes there at expiration, you'll end up with a 100% return while having a 1:1 R/R profile on your position. It's a beautiful position when structured properly that allows the trader to sleep better at night.

Hi, for bear put spread,when used to make a directional bet, what R/R ratio can be considered as ideal? Seems 1:1 ratio is common for this strategy?

iloveoptions · Jul 31, 2010

Quote from joesan:

Hi, for bear put spread,when used to make a directional bet, what R/R ratio can be considered as ideal? Seems 1:1 ratio is common for this strategy?

Consider yourself very lucky if you get a 1:1 ratio and the long side of the spread (whether it's bear put or a bull call spread) is nicely in the money. Any thing higher and you're talking astronomical returns. For that kind of return, you are surely going to be required to leg into the spread.

traderlux · Sep 3, 2010

....range, have you found religion?....

Quote from Range Rover:

I predict that a stocks price will rise 1 or 2 dollars within 5 days,what option strategy would the option experts use to profit from this play ?

My stop would also be 1 or 2 dollars

tradingtechnolo · Sep 5, 2010

Quote from Range Rover:

I predict that a stocks price will rise 1 or 2 dollars within 5 days,what option strategy would the option experts use to profit from this play ?

My stop would also be 1 or 2 dollars

can you give some evidence that make you feel that?

Nine_Ender · Sep 6, 2010

Quote from Range Rover:

Thanks.

I'm new to options so please forgive my ignorance .I'm assuming the current month and an at the money option ?

I found that usually just out of the money options are more profitable, sometimes the premium doesn't yet reflect the likelihood of a strong move into the money. You can get many more contracts this way, if you are right you rake it in once the options go in the money.

You need a high probability of being right and be willing to lose your investment. The rewards can be massive.

traderlux · Sep 18, 2010

.....who he?.....

Quote from alexandercho:

Ah I get it the reason he mentions buying a deep out of the money that has .05 premium. Is because you can sell it later for .10-20 for a decent profit if ti does move in that direction. If you lose you're maximum downside is 100% maximum upside is anywhere from 300-10,000% it's no big secret. I figured that one out a long time ago.