Are options not leveraged?

F

farmerjohn1324

For some reason I always thought options were highly leveraged...

I sold (paper trading) a call of Boeing on market open Friday. Cost $20.70 per contract ($2070 total), expires April 9th, 2020.

That day, I made 9.62% on this option. While BA was down 10.27%. So it seems there is no leverage here at all. Just perhaps the chance of losing everything if your option expires worthless?

Or is there an opposite side to "expiring worthless" where if you predicted correctly, the option price would grow exponentially as it nears expiration?
 
Last edited:
farmerjohn1324 said:
For some reason I always thought options were highly leveraged...

I sold (paper trading) a call of Boeing on market open Friday. Cost $20.70 per contract ($2070 total), expires April 9th, 2020.

That day, I made 9.62% on this option. While BA was down 10.27%. So it seems there is no leverage here at all. Just perhaps the chance of losing everything if your option expires worthless?

Or is there an opposite side to "expiring worthless" where if you predicted correctly, the option price would grow exponentially as it nears expiration?
More...

Seems you are "touching your toe" to the waters of options without first comprehending them.
In the future, if you would provide sufficient detail, others would not have to expend effort reverse-engineering what your question should have been! AKA: You sold a 162.50 CALL! Why not state what you did rather than pissing us off trying to fill in the missing details? Pardon the use of metaphors -- some "C2H5OH" may have been ingested!
 
farmerjohn1324 said:
For some reason I always thought options were highly leveraged...

I sold (paper trading) a call of Boeing on market open Friday. Cost $20.70 per contract ($2070 total), expires April 9th, 2020.

That day, I made 9.62% on this option. While BA was down 10.27%. So it seems there is no leverage here at all. Just perhaps the chance of losing everything if your option expires worthless?

Or is there an opposite side to "expiring worthless" where if you predicted correctly, the option price would grow exponentially as it nears expiration?
More...
Because you can do it using a fraction of the capital.
Consider an oom option costing $0.01
You buy 10 contracts.
That's effectively 1000 shares of that stock but it only cost you $10
So, yes it's leveraged.
Closer to atm, the less but it's still leveraged.
 
SanMiguel said:
Because you can do it using a fraction of the capital.
Consider an oom option costing $0.01
You buy 10 contracts.
That's effectively 1000 shares of that stock but it only cost you $10
So, yes it's leveraged.
Closer to atm, the less but it's still leveraged.
More...

Is the price more volatile as it approaches expiration?
 
SanMiguel said:
Because you can do it using a fraction of the capital.
Consider an oom option costing $0.01
You buy 10 contracts.
That's effectively 1000 shares of that stock but it only cost you $10
So, yes it's leveraged.
Closer to atm, the less but it's still leveraged.
More...

If the stock was worth $100 when I bought that option for $0.01...

Then the stock went to $110... (Gain 10%)

Would the option gain just 10%? Or more?
 
Been getting into practice emini futures.

It very quickly came to my attention that no matter how much I buy, I would lose it all after a 2% decline. Due to the 50x leverage. 2% x 50 = 100%.

So when trading these extremely highly leveraged instruments, do the stops have to be extremely tight at all times? That would make longer-term trading practically impossible.
 
You must log in or register to reply here.
Back
Top