OK, some people call me a “Maverick”. It may be because “Top Gun” was one of the first movies I ever saw with my wife.
Or maybe it was “Hot Shots”, not sure, it was a long time ago.
Anyway, here’s some Maverick-y ideas to play with this market.
Buy nearish term calls or puts, or both, and trade stock against it. Your risk is that you’re buying volatility at the highs, you’re reward is the market just won’t stop plowing around.
A little squeemish with that one? Me too, not buying much of anything in options any more. My position now is like one big OTM call, with a couple puts left as a hedge.
How about buying bullish call spreads? You don’t really risk volatility.
Well, that’s fine, but depending on the numbers involved, it’s not all that different from simply buying calls. I mean if you buy 1 call for $8 or 2 call verticals for $4, you’re really just risking the same amount of money if the stock implodes. But you’re reward is better buying calls. So it depends on the specifics, but I kind of feel like if I’m going to risk throwing away the premium on a directional move, I’d rather just keep the upside.
How about just buying stocks with stops?
Well, hasn’t exactly worked like a charm lately, but you can certainly make a case we got so unbelievably extreme it’s not a bad idea to take a shot. Cramer’s calling for a 20% decline, what better indicator can we get than that?
What about some ratio call spreads? Like buy one of a call here and short a greater number at some distant OTM price that has some real volatility pumpage too?
Kind of like this one, but again, it’s about the specifics. I do expect volatility to stay frothy until we actually rally (as opposed to us settling in here in any meaningful way), but once we rally, it’s pretty clear options have a lot of room to get pounded. Current ATM’s will hold up better in that situation, as their intrinsic value will explode. So while I like the idea in concept (especially since unlike a straight vertical, you may even structure it to take a credit in), it’s a little trickier in practice. I tried it in POT the other day for a small credit, and the stock has only gotten plowed since, so at this point I really have not accomplished anything.
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Thanks. You’ve confirmed my frustration. My approach to all this is to stay hedged, do nothing and observe.
I may occasionally get restless and distracted and buy bullshit stocks like HANS, just for S&G’s. But, that’s only with play money.
yeah, kind of what i’m doing. Trading a little bit here and there, but really not too active.