Hope everyone had a great holiday.
I would appreciate any views on trading the synthetic vs taking a cash position, mainly for the purpose of maximizing available margin.
I am looking at a
TOS recommendation to buy WUBA with a $47.80 target. Closed at $42.78. All numbers generated by TOS.
If buy the cash, am looking at 300 share position, and target is reached the profit is $1,506.
Then look at the synthetics with a
strike range of $35-$50.
Strike Cost Breakeven Profit on expiration at $47.80
$35 $6.60 DR $41.60 $1,860
$40 $2.20 DR $42.20 $1,680
$45 $2.95 CR $42.05 $1,726
$50 $8.10 CR $41.90 $1,770
these options are not the most liquid, but my query is quite general.
The "obvious" trade seems to be the deep
ITM $35 strike. However am aware that anything that seems obvious rarely is.
Do the active traders here have a "rule of thumb" when choosing the strike for a synthetic trade.
Many thanks.