Need advice on option strategy

K

kodiakbuttons

Sorry for the newbie question. I am not sure if it is even possible to answer without knowing the call prices or other details but here goes anyway....

If a stock is trading at $102 and I expect that it will reach $110 within the next 90 days and I'm willing to risk a maximum of $1000 on the trade what strategy would offer the best risk reward ratio?

Thanks in advance for any advice!
 
a simple answer could be to buy a protective put having a diff. of your risk if buying the stock, or buy a spread with a debit of 1000. as you said, hard to decide without more details.
 
I would strongly encourage you to learn more before you trade optoins. Also, your broker might limit the trading strategies available if you don't have any experience. You will need to submit an options approval form to begin trading options.

Options strategies really can vary in terms of risk/reward. You can simply buy calls, which involves high risk and high reward. Or, you can create spreads that have very low risk/reward. I would begin by watching the market and paper trading.

thinkorswim has a great tool called papermoney that can be used to test strategies real time. the web site whatstrading.com provides updates about trading activity throughout the day, which includes strategy updates. see what the pros do and how they are investing in the options market. finally, learn to use risk graphs. check out theoptionsguide.com and look through the various strategies.

take your time and get to know the fundamentals of the market before you trade. just my 2 cents. good luck.
 
Quote from kodiakbuttons:

Sorry for the newbie question. I am not sure if it is even possible to answer without knowing the call prices or other details but here goes anyway....

If a stock is trading at $102 and I expect that it will reach $110 within the next 90 days and I'm willing to risk a maximum of $1000 on the trade what strategy would offer the best risk reward ratio?

Thanks in advance for any advice!
More...

Risking a max of $1000 would signal a simple call purchase IMO. You could buy DITM calls for a low risk-return or OTM calls for high RR. Or you could buy 100's and sell 110's for a 1k debit.
 
You must log in or register to reply here.
Back
Top