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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There are at least 2 ways to do this:
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Here are some possible ways to use this leverage.
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1. Buying deep in the money LEAPS calls.
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2. Synthetic long stock.
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##### DITM LEAPS Calls
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##### Buying 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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###### Example
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Assume I have $100k invested in plain equities. I want to leverage up to 1.3 to invest in US large cap. I buy DITM LEAPS calls 1 year out in SPLG (a lower cost version of SPY), using the strike price for .90 delta:
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.
@@ 211,13 228,13 @@
- 4 SPLG 2026-03-20 71 Call
- -4 SPLG 2026-03-20 71 Put
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Since they are ATM the delta will be .50 for both. So the notional exposure is:
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Since they are ATM the delta will be .50 for both. The exposure is:
The actual cost of the options might be $500 in cash. That means $500 is giving a notional exposure of $28400 in the S&P 500. With portfolio margin, my buying power (coming from the value of current equities) might be reduced by $3k to hold this position.
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The actual cost of the options might be $500 in cash. That means $500 is giving a notional exposure of $28400 in the S&P 500. With portfolio margin, my buying power (coming from the value of current equities) might be reduced by $3k to hold this position, however there is no cost for that.