VTI is currently ~10% off its highs (down to 135 from 151) and I know many aren't confident in the market's direction right now. With options premiums being high right now, there are some nice opportunities for anyone wanting to take a longer term position but also take some risk off the table.
The November 120/125 VTI put front spread is trading for a $0.45 credit right now, so you can sell two of the November 120 puts and buy one of the November 125 puts for a $45 credit. If the market stays flat or rallies, you get to keep the $45, which is a 0.4% return on $11,455 in capital, assuming you cash-secure the put. That's 2.6% annualized, which isn't bad at all.
If the market drops another 10% (max profit on this trade is with VTI at $120) you make $525, which is a 4.5% return (30% annualized), but you'd also have the opportunity to assess and roll this out a month or two.
If the market tanks, you can get assigned your shares of VTI at $120 but also collect the initial premium for the short put AND the max profit on the put debit spread, which means you are effectively buying VTI at $114.55, which represents a 25% "discount" from the ATH. Even if we get another 2008 (and that's very unlikely) 25% off the ATH seems like a great price to buy in for a long term hold.
Submitted October 28, 2018 at 07:42AM by never_noob https://ift.tt/2CLDJkz
