How to create synthetic leveraged product

TheoHornsby · Nov 2, 2010

Quote from ivanbaj:

Using options will make you guess the future volatility. You can count your deltas but if you are wrong about the volatility your result will vary.

Also when you are using options you need to pay close attention to the gamma. If the gamma gets too big then the delta can get out of control in no time.

To avoid the Greeks you can build your own index buy buying the appropriate quantities of s&p 500 companies shares or hedge yor s&p contract by offsetting with number of shares or another index like the ym or nq or any other correlated index.

Also a calendar spread in the futures contracts might work.

The cost and complexity of managing spreads and hedges might be high for you.

It seems you need more capital.
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What does any of this have to do with the OP's request for a 5 to 1 leveraged option position?

Chronos.Phenomena · Nov 2, 2010

50x is the contract multiplier.. So one tick is worth 50 times that tick. If I buy two contracts Market tick will be worth 100 ticks... Its very chunky if you know what I mean.

I weight my positions with the confidence metric of my model... Very granular stuff.

If model is very sure, I'll take 100 times leverages, if it's little bit less sure, I want 90 times leverage, not 50 or 0.

Hope it make sense

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How to create synthetic leveraged product

TheoHornsby

Chronos.Phenomena