Which bullish strategy can I use for this view?

TrustyJules said:
The strategy spread'em refers to is called a collar - it basically covers you for the downside at the cost of giving up the upside over 30$. As others have stated the timing of your strategy is rather important, if your view is for the next week it requires a different approach then if it is over a month, several months or even longer.

Given that what you basically predict is a range you could consider selling an Iron condor. Doing this on a 20$ stock isnt that worthwhile unless its very volatile but the principle would work as that strategy yields a return for a range-bound stock:

OS 1 C JUN18 30
OB 1 C JUN18 35
OS 1 P JUN18 10
OB 1 P JUN18 5

This will give you a credit without knowing more on the stock its impossible to say how much. As a rule of thumb dont do it unless the credit >1$ for each of the two spreads.

Another option - no pun intended - is to do structured call writing. Basically you sell puts until you get assigned and then you sell calls on the stock. A fairly standard example given in literature would be:

100 Shares XYZ
OS 1 C MAR18 30
OS 1 P MAR18 10

By March 18 there are three possibilities:

1) Stock is between 10 and 20$ - you do the same trick again for April;
2) Stock is under $10 - you get assigned on the put and subsequently do OS 2 C APR 18 20
3) Stock is over @30 and you get assigned on the call - you OS 1 P APR18 30

And repeat over and over, because you predict a range-bound stock this should be more worthwhile than simply holding the stock.

There are much more aggressive strategies:

OB 1 C MAR18 20
OS 3 C MAR18 30
OS 3 P MAR18 10

This may be possible to do for a credit - it all depends - in any case you finance your long position with shorts at the edges of your range. Obviously if the stock goes below 10 or over 30 things will move fast against you. Variations are possible on all of this.
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Thanks a lot! Really helped.

Thanks to everyone else for your feedback as well! Greatly appreciated :)
 
I'd watch the moving averages and wait for a crossover before doing anything. It ain't perfect but in my view you're betting going long with options late than early.

A spread will mitigate much of that time decay risk.
 
TrustyJules said:
The strategy spread'em refers to is called a collar - it basically covers you for the downside at the cost of giving up the upside over 30$.
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Since he didn't mention stock ownership, what "spread-em" described is a synthetic long (SELL the $10 put to finance the BUY of the $30 call).

What you described is collared long stock with the option transactions reversed (SELL call/ BUY put) which is synthetically equal to a bullish vertical spread, which would be the preferential entry in terms of frictional costs.
 
ironchef said:
If my conviction about the movement is strong, this is what I would do:

Buy a $20 straddle with expiration that roughly matches the time frame of my estimate of when this would happen.
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I agree with the straddle "but only if"
1: the Total Debit of the Call + Put does not equal more than a total of $5.00 and you buy
at least 3-4 months time before option expiration, giving the trade time to play out.
2: That would give you a +100% profit on the total debit if the stock hits either $30 or $10.

(Below is the best case scenario)
If the stock is in a trade range (sideways) moving in repetitive patterns between $10 and $30,
sell at one end of the range for +100%, and then wait for the stock to move to the other end of the range and sell the other option for +100%.
"This is why you buy lots of time before expiration."
 
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