Bigworld, I'm thinking we could be entering an extended period of sideways consolidation for the markets, similar to what happened from late 2014 to late 2016. At that time the market more or less went sideways, with periodic selloffs due to factors like the end of QE, Fed tightening, the yuan devaluation, Brexit, the ebola scare, etc.
The Fed wants things stable so they can continue raising rates, and they've also spoken of their concerns over relatively high valuations in the stock market. So the Fed will probably apply just enough juice when needed to keep things sideways within a range, say 2000-2400 range for the S+P and 18,000-21,000 for the DJIA. They're afraid to let the market correct more, but on the other hand they don't want the market to get too overextended to the upside.
Of course a black swan event in the world could throw a wrench into this scenario, but barring that I'm figuring the Fed wants stability in the markets if possible.
Assuming 2000-2400 and 18,000-21,000 ranges for the S+P and DJIA, that represents a 15% fluctuation, which for the LEAPS should be a lot more. So may be some good profit potential there for trading within that 15% volatility range. On the other hand, trading with the expectations of a really big crash is a lot riskier.
With the leverage of LEAPS, a regular 10-15% correction could mean a big profit. The only way you'll be screwed is if there is no real correction (none over say 5%) and the market is just flat or slowly trending higher for the next 2 years. Also you could lose if the market corrects by say 10%, but you hold out for more and don't take the profits, and then the market recovers and the 'big crash' doesn't materialize within the 2 year timeframe.
AI
