Using LEAPs to gain leverage

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Topic Author
lexor
Posts: 840
Joined: Thu Feb 27, 2014 9:32 am

Using LEAPs to gain leverage

Post by lexor »

Trying to learn how to use deep in the money options (LEAPS) to gain leverage.
  1. How do I calculate the effective margin rate? Let's say I'm buying SPY calls with a strike price of 430 for 2 months from now. Commission is $1 and total costs is $5001 dollars.
  2. How do I select a strike price if all I'm trying to do is gain leverage and not guess the price? Should I just choose a strike price of the current price? Should I just assume something conservative like 3% or 4% yearly growth? I'm not sure if this was discussed in markettimers old thread on this topic: viewtopic.php?t=5934
  3. Is there a total market fund that is efficient to trade with options (meaning the market is liquid)? I know I could use SPY but I'd prefer to bet on the whole market.
“The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.” -Mr. John C. Bogle
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