Mods: please move this thread if you see fit. And calling @Maverick74 @destriero Hi all, lets say I have a delusional idea/s as follows: 1)I expect FB to hit 80 in the next 18 months. I do not know when or how(variance). What is the best strategy(likely option-wise) to capitalize with? If OTM fly, I need to know when to pin. I'm thinking OTM calendar, keep selling front mth vs back mth until I hit. 2)I've not taken my meds and I expect a touch of SPX 2000 in the next 18 months. I do not know when or how(variance).Thoughts on simply going long furthest back mth VIX futures for the short VS options or outrights? Here are my requirements: No exotics. Exchange traded stuff only. I would open the position this week. Assuming I have no idea on the path the FB/SPX takes to hit the number, but that it will in the time frame. Suggestions are appreciated. TIA.
It depends on whether you emphasize path-dependence or independence. IOW are you concerned with terminal projections or PNL over the course of the hold? I take it you're looking for best terminal-performance as you've stated you don't know "how or when." I like the calendar as a diagonal with strike selection somewhere between ATM and your target so that you're not praying for a strike touch. I'd consider the Mar/Jun2019 130/140 long diagonal in puts from 3.50. Long the June 140s; short the March 130s. Unimodal delta so you can afford to hold the 20D 140 strike. The delta cannot invert, so a FB crash results in something approaching a 6.50 gain. The diag is a double, tomorrow, at $140 on shares. Gets better <$140.
You want to replicate a digital (PI) option? Take vol out of the equation and pick whatever 1:1 bear spread (or strip of verts) that you like. Single expiration.
Thanks for the thoughts @destriero Yes, at this point terminal performance. But let me run this by you: If I was on the flipside and extremely concerned about PNL over the holding period, would simply long OTM puts be the answer?