There are even some fintech companies such as [SyntheticFi](https://www.syntheticfi.com/) offering to do these loans for you.
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### Options as leverage
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### Derivatives
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There are many strategies to trade options. This focuses mainly on its use as leverage. One option contract represents 100 shares, and its cost is much less than actual shares. That should give you an idea of its leverage. In most cases you would only be trading the option, and not the actual shares. However, the profit/loss would be similar to as if you were actually trading 100 shares.
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Options and futures can be used for their inherent leverage. There are many strategies to trade these, and this only focuses on their use as leverage.
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The [Bogleheads forum](https://www.bogleheads.org/forum/index.php) has some good threads on this:
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- [Futures vs. Options for broad-market leverage?](https://www.bogleheads.org/forum/viewtopic.php?t=280676)
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#### Options
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One option contract represents 100 shares, and its cost is much less than actual shares. That should give you an idea of its leverage. In most cases you would only be trading the option, and not the actual shares. However, the profit/loss would be similar to as if you were actually trading 100 shares.
There are at least 2 ways to do this:
1. Buying deep in the money LEAPS calls.
2. Synthetic long stock.
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#### DITM LEAPS Calls
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##### DITM LEAPS Calls
Overview video:
- [Buying Deep In The Money Call Options - Save 62% & Double Your Returns! (Better Than Stock Buying)](https://youtu.be/_rCiCmx2K0I?si=CksDSd62n09EHhG_)
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#### Synthetic long stock
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##### Synthetic long stock
This type of options trade allows you to do leveraged investing mostly using the buying power of your equities. Some cash is required to enter the trade, mainly due to the call being more expensive than the put. It is similar to using futures for leverage.
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You will need to apply for undefined risk options trading ability at your brokerage to do this because it involves selling a put (i.e. naked put).
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##### Example
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###### Example
Assume I have $100k invested in plain equities. I want to leverage up to 1.3 to invest in US large cap. I setup an ATM synthetic long 1 year out in SPLG (a lower cost version of SPY):
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This gives me a notional exposure of $28.4k in the S&P 500 at the cost of $3500. That is 8x leverage. That would give an overall leveraged portfolio of (100-3.5+28.4)/100 = 1.25.
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### Futures as leverage
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#### Futures
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#### Example
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##### Example
Assume I have $100k invested in plain equities. I want to leverage up to 1.3 to invest in US large cap.