A trader speculate that a momentum stock can go higher 10% - 20% in the next three months based on the history of it's fluctuations. It can go down also 5% from the current price in the next few weeks before it can hit the high.
The Current price of the stock is 200. The speculation is that it can reach 220 in three months. The trader wants to choose a strike price to buy CALL. Because since the trader speculate that it can go down 10% before it can go higher, should he choose a strike price of 190?
Please consider these situations too. The trader can wait until the price drops to 190 or buy a PUT to make a profit before buying call. Though those options are there, the trader wants to save his time by not waiting for the price to drop and focus on the future price of 220.