elaborate
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why don't most people do this
- Thread starter happy trading
- Start date
It's not a great idea because options are non-linear, which makes them an inefficient way to "lever up" on a stock (too many other factors).
???It's not a great idea because options are non-linear, which makes them an inefficient way to "lever up" on a stock (too many other factors).
Convexity is what make options so attractive.
Those of us who make a living trading single leg is essentially doing this. We replaced margin interest with options premium, avoid margin call but take the time decay risk. We do it when options is cheaper than margin.
As always, the devil is in the details.
???
Convexity is what make options so attractive.
Those of us who make a living trading single leg is essentially doing this. We replaced margin interest with options premium, avoid margin call but take the time decay risk. We do it when options is cheaper than margin.
As always, the devil is in the details.
you're doing relative value which is not the same as just:
and my comment was more of a response as to why one wouldn't just assume that buying deep itm calls is a better payoff vs. buying the stock outright. The convexity in options is not the same as leveraging a position.why wouldn't everyone buy a deep itm option and keep the rest in cash
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Both very good points and in most cases relative values are very close or someone will arbitrage it away.you're doing relative value which is not the same as just:
and my comment was more of a response as to why one wouldn't just assume that buying deep itm calls is a better payoff vs. buying the stock outright. The convexity in options is not the same as leveraging a position.
To make money in this business I need to be more correct than the market.