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Tackle Today: Options Power #1: Leverage

May 4, 2022

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Tackle Today - Options Power #1 - Leverage - Three pulleys (source: Wikimedia Commons, authors Prolineserver and Tomia)

«Leverage = Small Cost, Big Return.»


Options allow traders to make cheap bets with considerable upside. Indeed, leverage is the power that speaks the loudest to market speculators.

But it’s not just gunslingers and adrenaline junkies that find it valuable. Intelligent investors also tap into leverage when seeking low-cost wagers that improve their capital efficiency.

Leverage manifests itself in many ways, but purchasing a simple call option for a bullish bet is the most straightforward illustration. Suppose we buy a $100-strike call option for $5 on a stock trading for $100. Because the call is at the money, it carries a 0.50 delta. If the stock rises 1% to $101, the call option will rise in value by 10% from $5 to $5.50.

1% rise in the stock = 10% rise in the call option.

That’s leverage.

When used correctly, it can amplify your returns.

As you progress from simple strategies to more complex spreads, you’ll see how you can further enhance the leverage by shrinking costs. For instance, we might use a bull call spread instead of a long call to create a position where a 1% rise in the stock delivers a 50% gain to the spread.

Join Coach Gino next Monday night for the Options Success: How to Leverage Financial Markets to Achieve Freedom webinar to learn more. ⬇️

🛑 Options Success Webinar: How To Leverage Financial Markets To Achieve Freedom with Coach Gino Poore | May 9th at 8:30 PM EST on YouTube

Join Coach Gino Poore (a.k.a. The Theta Maker), veteran trader, co-founder, and CIO of Tackle Trading in this exciting webinar where you are going to learn the 3 ways that options trading can transform your life in the financial markets:

① Low Risk, High Returns: That is the true power of options: LEVERAGE. You are going to learn how to unleash this power.
② Generate Cash Flow = Passive Income: How to use the power of options to generate cash flow and compound those gains to achieve Financial Freedom.
③ Protect your Assets: How to use the power of options to protect your assets.

You don’t want to miss it!

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