If I think that ES will have a range of 40 points (or more) next week is there any good options strategy to take advantage of this assumption ? The assumption if just for +40 points. No assumptions of which day will the range be completed or how that range will be divided above and below the opening price.
Buy 05aug expiry straddle around 28 and maybe sell the 2120/2200 strangle... but that would limit any move beyond 40 If you stick with just the straddle, you can gamma trade around your strike... and put overnight futures orders in to capture spikes outside reg trading hours..
No, he thinks the range in S&P500 will be at least 40 points in the next week and wants to know how to have a profitable trade when he's correct. He says nothing about a vol crush... where do you get that from??? So if you expect 40+ point move and you can buy the straddle at below 40 point move... that will be profitable, because... ES now: 2165 ES at 2125... 2165 straddle = 40 at expiry ES at 2205 ... 2165 straddle = 40 at expiry So... buy straddle below 40 and you make money if it moves beyond that. If he thinks it will move between 2145-2185, you can still trade gamma and make money on the scalps.
OK, I interpreted the OP differently--similar to K-Pia and OC. I read it as "within a range". So long straddle is fine and I would exit at +30% of debit. Maybe a short fly as well, but I hate 3-legged setups (since one side if so far ITM resulting in poor execution) unless you do the iron fly.
Okay. Vol crush isn't really likely at these IV levels though... so he would be left with a theta capture with short gamma. And with 40 point move, short gamma doesn't sound very appealing to me. Yeah I though of a short fly as well... but that limits your gamma play.