Gm All, I’m looking for a less expensive version of SPY. Any suggestions? At the moment the price is 270.81. I like to grow and shrink my positions from 100 to 2100 shares. At this price, 2100 shares would cost about USD 567,000. I simply don’t have that kind of cash lying around, even with leverage. Is there a cheaper exposure to The S&P out there, with good liquidity? Thx Keith =)
If Options, how far out? I normally like to buy the equity outright so that I’m not on the clock, and don’t have to worry about expiration.
The farer you go out, the less you have to worry about time decay. I guess the answer depends on your holding time frame. How long do you plan to hold the position?
Options are a good way to get exposure to a move, but my feeling is that you have to roll positions. The idea is that you generate the same profit using less capital than you would with buying shares, not that you are able to predict to the month what is going to happen. It's a good way to "opt" into a future move.
Here is what you should consider, when deciding on options: sell vertical spreads. What are the advantages? 1. Time is working for you, not against you. 2. The stock can stay in a range, and you would still make money. 3. The tied down capital is much less, than owning the stock. 4. Your max. loss is predetermined and limited. 5. If you set the spread farer OTM, the market can go against it and you can still end up with profits... Disadvantage: 1. If the stock moves a lot, you would make less than having the stock. Since you are planning on playing the index, such a big move upward isn't expected anyway. 2. Cost could be a bit more, but not signifficantly... 3. %-wise you would lose more than just playing the stock, if it goes against you, but again, the max. loss is predetermined. Simple example: Instead of going long the SPY 100% of your capital and expecting a 5% upward move let's say in the next 2 months, you could sell a vertical put spread and you would be tying down only 10% or so of your capital while you could make the same return. Best part is if the market stays flat, you still make the same return...