Let's say I'm sure that some index or stock will go up by 100% in near future (3 months, half a year, etc) but I don't know exactly when, but it will happen for sure. Before that move it can go down significantly. What strategy would you reccommend to take advantage of that upside move? I know I can just buy it and wait, but maybe there is any better approach using options / futures etc. to multiply gains?
High upside potential, low downside risk strategy
- Thread starter Qulek
- Start date
If you know 100% then take 100% of your investment capital and buy without leverage. The math is simple. But you don't know 100% so can you give us some more details to keep this real?
With options, you have to be right on direction....right now. The moment you place that bet. If you intend to profit beautifully.
Seeing you only know the general, vague, direction, but not time....you could sell options on the opposite direction to work as a hedge equalizer, while your up bet temporarily suffers down losses as you wait for that move up.
That seems like a weird, inefficient, failed strategy, if you ask me.
With trading, it's all about being right...right now. Everything else is just noise and chatter and excuses.
If you're sure of such a thing, you already have a delusion problem
You don't buy a stock with a three month outlook "knowing" it can drop significantly, without a hedge. Otherwise you would not be asking questions about how to protect from it dropping a lot.
What you do, based on my limited knowledge of options, is you buy the damned stock for the upside move which you are so sure will happen and be 100%. But because you are kinda unsure? You buy a put at the same strike as your target price to sell the stock in 3 months, half a year, etc. That is your protection.
As the theta goes along as the stock moves up, your decay on the put option will also increase. Eventually what will hopefully happen is that the stock will move 140,000%, so your put expires worthless, and you sell the stock in 3 months at great profit, with a minor fee for the put protection (The premium you paid).
A similar question to yours has already been asked. https://www.elitetrader.com/et/threads/what-options-plays-are-available-in-this-situation.367624/
Look into this thread for answers.
So you are saying I have no idea what I am on about? I agree.
I just wanted to post the link to that thread there because the OP's question is almost exactly the same as the one that was asked earlier in the other thread. It's not a reaction to your post.
But just so you know, your description about theta and how options' prices move in relation to stocks are not exactly correct. No offense.
Hey, no offense, I am cool. I know nothing about options, and sometimes post what I think is a good thing. But freely admit that you options guys are fukin' crazy. I know NOTHING! (You'd have to see the history of my posts in the options section here. I try to get it right, but am not offended when I get it wrong.)
Heh
Options are a beautiful thing,
They are better....than any casino game, or any sports betting.
Bet on direction, at the right moment.
Buy weekly options, nearest expiration. ATM, at the money strike price.
And bet away~ to your heart's content,
If you have good, great, timing...that's like knowing what cards are in the blackjack shoot next,
And the great thing is....the payoff...isn't a flat constant 1:1 ....it can sometimes vary greatly to your favor,