Excellent points. Particularly about buying some OTM protective options. Note that OTM, when they hit their sweet spot, -rapidly- appreciate, and if done in a type of ratio position, can help offset the loss in your deep options. 'course, between the vast spreads on deeps and the cost of cheap protective options, there goes your edge... What you oughta do is subscribe to a live quote feed service, bring up some option chains and observe over time what -actually- happens. It will be different than what you think. Another way of viewing this is that if this were a fabulous stategy, everyone would be doing it...but, they're NOT. Understanding appreciation/depreciation of different strikes goes a LONG way towards validating(or rejecting) strategies that look wonderful late at night while you're trying to go to sleep
frost - Trading ITM options for leverage is not a great plan. The transaction costs are just too large compared to the DOW 30 stocks which are very cheap to trade. Just trade the individual stocks - and if you can't take positions in every signal, it's not a big deal. If your strategy has that much edge, you will have enough money to trade all the signals in a reasonably short period of time. What is the hurry? Alternatively, raise capital. It is hard enough to win trading stock without multiplying your tx cost by several times. kps