Here's a scenario a friend and I were discussing. I wonder if some of the options pros out there could help us figure out the best strategy? (dollar value is hypothetical) "I have $15,000 of new stock market money to invest into the broad market. My investment advisor strongly advises to put it in the market today (Mon, Jul 30), but I will not have access to the money until Aug 16. I am worried that over the next 2.5 weeks, the market may go up substantially such that I would no longer want to just put it all in, and would instead be forced to dollar-cost-average over the next year. I think that some strategy involving the buying of call options on SPY or the index itself might be able to insure me against any rise in the market between now and Aug 16. Ideally, what I'd want is a strategy that would deliver to me the entire gain that my $15,000 would give me between now and Aug 16, assuming that I invested it in SPY today. If the market remained static or went down, then I guess I'd lose the premium. What specifically should I do?"
Plan A: Take $5000 and put into a brokerage account. Learn how to do options trading, using one or two contracts in SPY or IWM. For the first couple of months, forget about profit and learn the mechanics and create a trading plan. Once you can make a profit with a $5k account, you might then increase it. With a correct trading plan, earn 5-10% per month. Plan B: Start trading now with ten contracts. Lose half of the account while you are learning how to trade. Close the account and put it into CD's at 5% per year. From someone with personal experience with both Plan A and Plan B.
Just curious ... .how long do you expect it to take to learn to earn 60 to 120% a year on your money?
why are you using an investment advisor ? They don't care about you, they only want you to invest money so they can get a commission out of you. Nobody that cares about your best interests would advise you to invest in the market today. Investors and traders alike still aren't sure which way the market is headed. Fire this investment advisor, buy some books, and learn to do it yourself.
nec, If you really wanted to do this, you could simply buy 1 deep-in-the-money AUG call option on SPY, which I'm not necessarily saying is a good idea...but it's a simple trade that would closely mimic owning 100 shares of SPY (roughly 15k worth). This would get you up through Aug 17th, when it would expire.
Unless your investment adviser has a solid record of timing and profitability, I wouldn't be in a dither to rush in. If not, I'd bet that his motivation is fees/commissions (from you). If you had the 15G's today, what would you do with it? Would you buy specific stocks? If so, sell 15 G's of naked puts on the stocks you'd buy today. LOL - That's stocks purchased if assigned not 15G of premium sold.