May I get some ideas on different option strategies for current bull conditions besides buying a call ? I have been trying following with some success (1) Buying a Collar but then some people suggested a short put spread instead. Are they same & What are the pros & cons ? I just bot a collar & future went thru the roof with lots of time before expiration. How do I take advantage of it now ? (2) Buying futures & a put. (3) Never tried it but was thinking about synthetic future ( At the money Long Call + Short Put ) but how do I limit the losses ? ( Buying out of money put ? ) Thanks in advance.
(1) Yes, a collar is the same as a short put spread as well as a long call spread, as long as the two strikes are the same in all 3 strategies. The benefit of a put/call spread over a collar is that you only have two legs hence you save on commissions and slippage on the stock trade. If, on the other hand, you already hold the stock then a collar is useful. However, a collar is a hedging position, it's not something you want to hold in a bull market, unless you are happy to cap your gains at the call strike. (2) Buying futures and a put is the same as buying a call with the same strike price. (3) There's no benefit to synthetic over natural and if you buy a put for protection then all you are doing is taking 3 steps to create a simple long call position. Otherwise, there are a number of strategies. Verticals as in (1) are a good strategy when you want to partially neutralize the vega, you can also trade OTM butterflies/condors and calendars, which can have very favourable risk/reward ratios.
It's hard to find good bull call spreads right now. I've done a few in GLD and FXY, but most stocks aren't offering good spread characteristics. And volatility is still pretty high. You can do some synthetics if you are so bullish, although they chew up quite a bit of margin. I have little experience with otm flies, but would like to learn how to select them. Does anyone work with these a lot?
one of my experienced long time trader friend told me.. no matter what strategy you come up with,, in the end your direction has to be right for you to make money if the instrument does not move. that also means that your direction was right( if have an iron condor).. that said apart.. I am contemplating selling far APr 2010 bear call spreads 30% higher than current level. My bet . there will be a crash, i dont know when , hence I cannot buy puts.. i am willing to bet that the crash most likely will occur in the next 6 months. hence MY APR 2010 spread. which I will hold.. when the crash occurs, I exit. . if the instrument keeps rising, depending on time left or upcoming economic news, will exit for a loss.