Increase leverage of a long option ?

Discussion in 'Options' started by Aston01, Nov 13, 2015.

  1. Aston01

    Aston01

    This in all likelihood is a foolish question, but you never know till you ask...

    I was wondering if there are any techniques to increase the leverage of a long option. I know the further OTM you go the greater the leverage, but from what I can tell it still can't quite replicate the delta efficiency and gamma sensitivity of expiration day.

    I guess in some ways what I am looking for is a way to synthesize the gamma sensitivity of expiration day on other days.
     
    Last edited: Nov 13, 2015
  2. Bucket-shop binary options.
     
  3. xandman

    xandman

    OTM options on earnings plays purchased close to the end of the expected move. It's a lotto ticket. But if you get it right, the payoff is quite spectacular. Since your OTM option is the new ATM, it will also have peak gamma. But do you really want to keep holding your newly acquired deltas?

    [I'm discombobulated on the theory, but you can look up some old posts with visualizations.]

    Actually, a guy named "OTM Options" trades like that. Always wondered why he had "Options" in his name but did not believe in greeks. Seems he may have some good intuition.
     
    Last edited: Nov 13, 2015
  4. OptionGuru

    OptionGuru






    You can't increase the leverage of options, but buying 1 or 2 strikes OTM is optimal for weekly options - that will provide the most bang for the dollar.





    :)
     
  5. xandman

    xandman

    How about spreads that are 1 dollar wide and 100 contracts thick?
     
  6. OptionGuru

    OptionGuru





    Could you give an example? Isn't the maximum reward of binary options the debit paid, or maybe even less. Regular options have an unlimited reward.




    :)
     
  7. OptionGuru

    OptionGuru





    IMO ...... Debit Spreads are no good. The extra premium collected isn't worth the reduced reward.



    :)
     
  8. Aston01

    Aston01

    I just need an option of an option...now that would be leverage :).
     
  9. xandman

    xandman

    Try futures options. When the customer implodes, they take the broker with them.
     
  10. Aston01

    Aston01

    #10     Nov 13, 2015