Looking for ideas

Discussion in 'Options' started by hajimow, Jun 13, 2007.

  1. I have about 20K cash in my 401K and I am looking for some trade ideas with the following requirements and limitations. I would like to get about 15% profit by the end of 2007 and I am ready to get out even by the end of the year. So no loss is allowed but zero profit is accepted.
    Some more info:
    1- I can not trade on futures.
    2- My broker is Fidelity so the commission is not that low that I would like as I have in my IB account. So geting in and out of positions might not be wise.
    3- I prefer to do trades with one or two months time frame. I don't want to do only one trade and see how it pans out by the end of the year.
    You can modify the gain and say like 15% is not possible and come up with a trading strategy that can result say 10% in the 7 remaining months. You can not go below 4% because in that case I would prefer to go with CD. In other words less than 4% does not justify the risk reward ratio.
    Please be more specific in your response and just saying that I can go with some option income strategies will not help.
    I was also thinking of combining a 6 month CD with S&P Call for Jan 2008 with the profit of CD. I am looking for more creative and specific ideas.
     
  2. (1) You could buy shorter-dated calls during the last 5 days of the month to take advantage of end-of-the-month "window dressing". (2) You could buy farther-out-of the-money puts in order to benefit from a "seasonal meltdown" that may happen during September or October.
     
  3. Most 401Ks are very limited in the positions you can undertake. FWIW, I wouldn't suggest buying Jan08 call vol.
     
  4. see my post under Married puts and collars strategy...
     
  5. u21c3f6

    u21c3f6

    As in a previous post, married puts and collars could possibly meet your criteria. However, the returns over time would probably be close to CD rates. There is a possibility for more but also a possibility for less of a return.

    Considering the dollar amount and the time, effort and learning curve you probably need to experience, I would suggest going with the CD at this time.

    Do some studying, back-testing and some paper trading before you "risk" (which by your criteria you really don't want to do) any real dollars.

    Joe.
     
  6. MTE

    MTE

    The simplest and probably the most efficient solution for you is to calculate how much you need to put into a CD now so that you have exactly 20K at year's end. The rest is your risk capital, which you can use to leverage up, but you must use limited risk strategies so that you cannot lose more than this amount. If you think the market is going up then load up on the calls, if you wanna bet on a selloff then buy the puts.

    This is the basic capital guarantee structure.
     
  7. More info that might help you to help me more:

    I am a very active option trader. My strategy is usually selling out of the money naked PUT and CALL. I take high risks in my IB account. I am quite familiar with all aspects of option trading and I have read about 4 books on option.
    20K is not all my money in my 401K. That is the cash portion of my account.
    I can not incrementally trade options . if I want to buy 4 contracts, sometimes I buy one contract at a time in my IB account but I can not do this in my Fidelity account because the commission will be almost 4 times.
    I don't want to buy PUT because what if PUT expires worthless? Remember at the end of the year , I want to get out flat in the worst case. Even losing one cent is not acceptable.
    I will also read the married PUT and Call thread that was mentioned.
    Many many thanks for everyone who contributes to this thread.
     
  8. u21c3f6

    u21c3f6

    MTE gave you a good idea.

    IE. a $19.5K 6 month CD will give you $20K at maturity. You can then use the $500. to buy puts or calls. If you are correct in your selection of puts and/or calls you have an additional return. If the puts and/or calls expire worthless in 6 mos., you still have your $20K.

    Joe.
     
  9. Hedge22

    Hedge22

    You could start with just a basic strategy of selling covered calls, I dont know if you will be able to get 15%, but it is a relatively safe and easier strategy to implement while you learn some more advanced plays. Plus you build up a little experience with options.
     
  10. u21c3f6

    u21c3f6

    This does not give him the safety of principal that he is looking for.

    In addition, what makes a naked put (covered call) relatively safe? :eek:

    Joe. :)
     
    #10     Jun 14, 2007