visaria, yes, that is what i was refering to. have you traded that way? (see my response to red.) i see the question of ditm, atm, otm, or wotm as one of conservative vs aggressive, what do think? tia, t'lux
Unfortunately not. I came across the idea in a book i read in my university library ( i think it was by Geoffrey Chamberlain) many years ago now. I totally forgot about it until you mentioned it. I think going with ditm is NOT a good idea, you need a good deal of leverage so atm or slightly otm is better. You can literally make a fortune with v llittle risk if the trend is strong enough and you are in a big move. I certainly do want to look at it now (will have to wait though until I'm back from vacation) , thanks for the heads up!
There is plenty of leverage with DITM near month calls. Pick a very liquid underlying that has decent B/A spreads down there. Use the q's or something like that. Try delta=.9 or so. When you have made 25-35% on them, roll them up, and out to next month if necessary. Roll them out in early expiration week if you still like the U/L at that time. No need to increase your position, pyramid, or use pie-in-the-sky OTM options. You can make plenty of money in a strong rally like this. Of course, you can also lose every dime. So stay small. Get out when the U/L loses steam. This is for a small portion of your account.