03-10-2020, 10:56 AM
(03-10-2020, 10:24 AM)fenders53 Wrote: Reviving this sleepy thread. This is NOT a conservative option idea for sure. Not something I intend to do today. At some point in the fairly near future I am considering buying some long dated options. They used to refer to them as LEAPS. Someday soon I'll run out of spending money to keep nibbling long shares without violating the stock % of my overall port. It my age I need to draw that line somewhere reasonable. If I don't I'll put the first few years of my real retirement income in jeopardy which is only about two years from now. I'm too close to get reckless now and wreck my plans. All that said I think I will keep about $10K of capital back and buy a few calls. I'd like to target a small basket of deeply discounted high quality large CAP companies I believe have a high chance of a strong rebound if the economy gets better. A chance to leverage the rebound I believe will come when the current noise quiets down some.
So I guess my initial questions are....
1. Where should I target the VIX so I am not paying far more premium than I should for any chance of success.
2. Approximately how far out of the money (%) so a 10 month or longer DTE has a reasonable chance of working out half way to expiration, or even longer if necessary.
These will be stocks like CAT, MSFT just to throw out something to add context. A quality industrial, tech and a pharma perhaps for some diversification. Not some distressed stock looking for a miracle. Not a crushed commodity based stock. I'll play those long with a few shares so I can wait as long as necessary to be right.
Once the market finds a bottom and stabilizes, I would think long-dated UVXY Puts would also be quite lucrative. They would have done quite well just about any time during the past decade.
I am intending to make a similar-sized bet to you at some point in the future, but don't think that will be for several more months (I don't think a V-shaped recovery is likely at this point). Long-dated blue chip calls seem like a solid bet. ADP, AMZN, JPM, MSFT, V, and stocks of similar quality seem like they would be a good fit.