Hey Traider, of course that would work as well. The reason is that I did some calculations in comparison with how much SPY dropped last December (about -16%) in comparison to how much SPXU gained (which was about +65%) and then chose strike prices that I feel they would each be in the money at about a 6% correction just to be safe. In the case that there was a 10-15% correction in the market, the profit potential on the SPXU call is significantly more than the SPY put would be, approximately 3 times. So that is why I chose this route vs. the put on SPY. On the other hand you could go with a put on UPRO which is the 3X leveraged ETF rather than the inverse. I would have to do some math to see which one seems to make more sense.
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Hey Traider, of course that would work as well. The reason is that I did some calculations in comparison with how much SPY dropped last December (about -16%) in comparison to how much SPXU gained (which was about +65%) and then chose strike prices that I feel they would each be in the money at about a 6% correction just to be safe. In the case that there was a 10-15% correction in the market, the profit potential on the SPXU call is significantly more than the SPY put would be, approximately 3 times. So that is why I chose this route vs. the put on SPY. On the other hand you could go with a put on UPRO which is the 3X leveraged ETF rather than the inverse. I would have to do some math to see which one seems to make more sense.
You know I was up in the air on that one McNoob. Would you wait a bit until after it potentially goes up higher first due to possibly continued concern or do you think it will just continue to reverse from here? Also, where would you expect it to drop too and when? Back to around 60 or do you believe it will drop a lot further in the case of a correction or something else? Thank you for your input.
I can see that side of the argument as well, I think it's more of a short term correction and then a continued bull but who knows. I guess I will make up for any option misses with ES longs, shoot probably even more so.
No idea. But the point is that if the price of oil spikes because of war drums, which turn out to be nothing, then the price will retreat.
If Trump is giving his friends a chance to make money in oil /defense stocks before de-escalating then I'd watch the tweets and wait for him to calm down
You got to pick the direction correct, otherwise you can lose big with the 3X thing.
It is a double edged sword, just like you can use 50X leverage in Forex. Essentially 3X is just enhancing your leverage, in this sense, option can have the similar effect but probably less risky if just buy call or put, as your max loss is set beforehand.
It is a double edged sword, just like you can use 50X leverage in Forex. Essentially 3X is just enhancing your leverage, in this sense, option can have the similar effect but probably less risky if just buy call or put, as your max loss is set beforehand.
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I hear you brother. I guess the way I'm looking at it is with the options, I only put up what I can afford to lose and just hope for the best. The profit potential is so big on a 10-15% index correction that even if I you put up $5,000 each month for 5 years and lost it 59 months straight, you would still be in the positive if it hit on the 60th month. I also hedge with futures so I would most likely make up the money lost on the options on that end.
Makes sense, I won't risk the long but I will pay attention to this all in order to catch it on the way back down. Thanks for the advice.
Oh please don't take it as advice, it's just rambling.
Ahem.
You take credit for that ?
Here, the sun will rise .
I'll be back tomorrow to take a bow.