# Make assumption about future stock price: is the option with best return fairly clear? [closed]

If a security has price X now, and one makes the assumption it will have a greater price Y later, is the option (or option spread) that will provide the best return fairly clear, including the variation of buying now and selling later, vs. selling now and buying back later?

As a concrete example, Apple is currently at \$365. Say in two months when they release earnings, the assumption is made that Apple will be \$420 or higher. Is it fairly clear which option or option pair will return the highest amount per dollar invested, investing today at this lower price? I.e. one could buy a call (which one), one could do a call spread -- either credit or debit, or likewise one might deal with puts. But, for example, selling a naked put would tie up a lot of buying power/margin in one's account, so the return on that may well be less. I.e. the return needs to factor the total money tied up in the trade.

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Seems fairly clear in this contrived example: wait as long as possible (until day before earnings) then buy as many short-term calls and sell as many puts at 420 as your budget and broker will allow. – Tal Fishman Nov 26 '11 at 23:26
That assumes Apple will stay at the current price up to a day before expiration, doesn't it? Also, which short term call (when it is bought)? – Ray Nov 26 '11 at 23:41
@Ray -- Please check out John Hull's book on options, futures, and other derivatives. It is very approachable and will help you frame a better question that we can answer. – richardh Nov 27 '11 at 2:55

## closed as off topic by Tal Fishman, richardh♦Nov 27 '11 at 2:54

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