Best trade/investment?

[new_trader]

If one had £1Ml in a derivative account what is the best trade/investment from these? And which would be your last choice from these 6.

1. Covered calls .

2. Short Strangles Deep OTM on index.

3. Short Puts OTM on index

4. Short puts OTM on stock

5. All cash in deposit account.

6. Short Calls OTM Stocks/index

 

[tightstops]

i dont know much about options but i know i dont want to sell them even if there is an inherent minute edge so that counts out 3,4 and 6. 1 and 2 sound like they dont go anywhere for a lot of effort. so through the process of elimination im left with very slowly but surely

 

[Rhody Trader]

If one had £1Ml in a derivative account what is the best trade/investment from these? And which would be your last choice from these 6.

Need more information, namely the overall objective of the account. It makes a difference given the varying risk profiles of the options you have presented.

 

[new_trader]

Need more information, namely the overall objective of the account. It makes a difference given the varying risk profiles of the options you have presented.

The objectives are:

1) The £1Mil must be repaid to the lender after 3 years
2) All profits will be split 50/50 with the lender and the a/c can be terminated at any time by either party (and profits still split)
3) The account will be terminated if losses reach 15% of capital.
4) The account must appreciate at 6% p.a

 

[optionist]

IF you have $1M, why are you asking online what to do with it? Feel free to deposit it into my account!!!!!!

I suppose, in my humble opinion using a mixture of short calls, puts, as well as long calls & puts would ensure that you reach your objectives. That said, you could pretty much do anything from a boring long call, to an iron butterfly.

If in doubt, just buy calls or puts, where you benefit from movements in the market, either way.

 

[new_trader]

IF you have $1M, why are you asking online what to do with it? Feel free to deposit it into my account!!!!!!

I suppose, in my humble opinion using a mixture of short calls, puts, as well as long calls & puts would ensure that you reach your objectives. That said, you could pretty much do anything from a boring long call, to an iron butterfly.

If in doubt, just buy calls or puts, where you benefit from movements in the market, either way.

OK. However the original question was out of the 6 choices given, which would be your 1st choice, and which would be your last or 6th choice. Keeping in mind the objectives!

 

[optionist]

I"m fully aware of what your original post was asking. I wanted to point out some other strategies.

Number one to do, if I had to chose would be 6, short calls on OTM stocks / options, least would be all cash account.

Happy?

 

[skyasa]

Using options, getting 6% per year with no risk is possible. you just have to trade as planned rather than going thru emotions.

My choice:
Allocating 98% of the capital for collars and arb trades,
rest 2% on very calculated spec or cash on hand.

Lot of collar positions can be constructed with no more than 3% risk. Collars on growth stocks yield more than 15% annualized yields with worst case risk of 2-3%

When there is a merger/ takeover, volatility drops and options are cheap. traders know where the stock is going. This is best situation for using capital. There are tons of opportunities get annualized yields of 10% or more. Adding the cheap puts lets you sleep well. If there is another company comes with higher offer, the returns will be even better.



I hope this is helpful.

 

[new_trader]

Using options, getting 6% per year with no risk is possible. you just have to trade as planned rather than going thru emotions.

My choice:
Allocating 98% of the capital for collars and arb trades,
rest 2% on very calculated spec or cash on hand.

Lot of collar positions can be constructed with no more than 3% risk. Collars on growth stocks yield more than 15% annualized yields with worst case risk of 2-3%

When there is a merger/ takeover, volatility drops and options are cheap. traders know where the stock is going. This is best situation for using capital. There are tons of opportunities get annualized yields of 10% or more. Adding the cheap puts lets you sleep well. If there is another company comes with higher offer, the returns will be even better.



I hope this is helpful.

Thanks. Will you achieve a minimum of 6% p.a with your method? What if you had a higher target of say 40% p.a?

 

[LondonUSTrader]

Using options, getting 6% per year with no risk is possible. you just have to trade as planned rather than going thru emotions.

My choice:
Allocating 98% of the capital for collars and arb trades,
rest 2% on very calculated spec or cash on hand.

Lot of collar positions can be constructed with no more than 3% risk. Collars on growth stocks yield more than 15% annualized yields with worst case risk of 2-3%

When there is a merger/ takeover, volatility drops and options are cheap. traders know where the stock is going. This is best situation for using capital. There are tons of opportunities get annualized yields of 10% or more. Adding the cheap puts lets you sleep well. If there is another company comes with higher offer, the returns will be even better.



I hope this is helpful.

Hmm...seems rather pointless when I can get 5.75% in my bank account.

 

[Profitaker]

New_Trader

There is always a best option strategy to suit your view on the underlying market, but without expressing your view on this your question is impossible to answer. 1, 3 and 4 are bullish positions, 6 is bearish, whilst 2 is a neutral position. Equally (arguably more) important than your directional view is your view on implied volatility, which determines whether you should buy vol or sell it.

 

[globaltrdr]

write em up

if had that much jack i would write plenty of calls on crude futures because a good percentage of people are irrationally bullish.

 

[Pitscum]

If one had £1Ml in a derivative account what is the best trade/investment from these? And which would be your last choice from these 6.

1. Covered calls .

2. Short Strangles Deep OTM on index.

3. Short Puts OTM on index

4. Short puts OTM on stock

5. All cash in deposit account.

6. Short Calls OTM Stocks/index

none..you would have been carried out recently in the trash with any one of those trades..what is it with people's addiction to short premium plays? oh i forgot..free money isnt it?

 

[luckyd1976]

The objectives are:

1) The £1Mil must be repaid to the lender after 3 years
2) All profits will be split 50/50 with the lender and the a/c can be terminated at any time by either party (and profits still split)
3) The account will be terminated if losses reach 15% of capital.
4) The account must appreciate at 6% p.a

With those constrictions I agree with Skyasa; Stick with the Collars! But I would be more of the Modified Collars or Advanced Ratio Collars for the High Flyers. After first month Expiration, Many of these Collars are Cost-less Collars. But he’s dead on here on your worst case front month purchase position of only 2% risked or less most of the time.

My choice:
Allocating 98% of the capital for collars and arb trades,
rest 2% on very calculated spec or cash on hand.

Lot of collar positions can be constructed with no more than 3% risk. Collars on growth stocks yield more than 15% annualized yields with worst case risk of 2-3%

Thanks. Will you achieve a minimum of 6% p.a with your method? What if you had a higher target of say 40% p.a?

If you’re looking for more returns, Learn to Maneuver your Collars!

EX: Stock breaks resistance,
1 Buy back your Call
2 Stock increases (place trailing stop)
3 Roll up your Put (after price action slows)

EX: Stock breaks support,
1 Hedge your Short Call first! (with either call ratio back spread or bear call spread)
2 Sell your stock
3 Profit on your Puts increasing
4 After price action slows, (get back into your stock and new Call levels and do it all over again!)

Now if your Collars screens dont produce enough companies (50 picks risking 2% of total amount of 1mil on each) I would turn to Index Iron COndors and Non-Directional Calendar spreads next! Basically the next lowest risk/reward plays, Hope this helps!

 

[gooseman]

If you're risk averse stick to buying spreads so you're not net short and it keeps your premium costs down. Personally I like the short term plays for just a few ticks and a quick reversal a la BH.

Maybe stretch to 1x2's closer to expiry but that depends again on your risk strategy....