For the last month, the best and the brightest from Wall Street have released in-depth research reports forecasting their 2025 S&P 500 year-end targets. These reports are filled with countless graphs, in-depth research and never-ending paragraphs breaking down the various reasons the market can go higher in 2025, or even fall.
And despite all that hard work, NOT surprising to anyone, the majority of these analysts are predicting, you guessed it, returns that mostly match the historical average yearly returns of approximately 10-15%.
Here is the full list, compiled by Bloomberg:
[text_ad]
As you can see, the average target of the major Wall Street firms is for a gain of 12.3% (right smack dab in the middle of 10-15%) with the highest analyst prediction for a gain of 20.6% for the year, and a low of 1.9%. Thank you soooo much for going out on a limb Wall Street analysts!!
Now in fairness to these Harvard/MIT grads, I don’t blame them. I whimsically predict the market will rise by 15% nearly every year, though I’m doing so by simply looking at the historical returns, without doing any research.
All that being said, if I were expecting the market to rally 12.3% this year (or more), much like the Wall Street analyst community, how would I go about this via options?
An Options Trade to Play the 2025 Year-End Targets
I would buy calls that cost dramatically less than if I were to buy the S&P 500 (SPY) stock outright.
For example, I might Buy to Open the S&P 500 ETF (SPY) January 585 call (exp. 1/16/2026) for $49.
Here is the profit and loss breakdown of this trade …
If the market were to fall in 2025, the most I could lose on this call is the premium paid, or $4,900 per call purchased.
To the upside, once the SPY went above my breakeven of 634, I would make $100 per point the stock rallied above that level.
This is a great leverage play to get upside exposure to a market rally this year.
And while I am bullish in 2025, if I wanted to bet against the market this year, or hedge a portfolio, this is how I would get bearish exposure:
Buy to Open the SPY January 580 puts (exp. 1/16/2026) for $30.
The most I could lose on this trade if the market rallied this year is the premium paid, or $3,000 per put purchased.
And to the downside, for every 1 put purchased I would make $100 per point should the SPY fall below my breakeven of 550.
Stepping back, 2025 has gotten off to a bit of a rocky start as interest rate worries have been weighing on stocks. However, we have been through these short-lived worries before, and more times than not these concerns are forgotten with time, and the market finishes higher by 10% or more by year’s end.
[author_ad]
