Tackle Today: Options Power #1: Leverage
May 4, 2022
«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 $5.50.
1% rise in the stock = 10% rise in the call option.
When used correctly, it can amplify your returns.
As you progress from simple strategies to more complex spreads, you’ll see how you can further enhance the leverage by shrinking costs. For instance, we might use a bull call spread instead of a long call to create a position where a 1% rise in the stock delivers a 50% gain to the spread.
Join Coach Gino next Monday night for the Options Success: How to Leverage Financial Markets to Achieve Freedom webinar to learn more. ⬇️
🛑 Options Success Webinar: How To Leverage Financial Markets To Achieve Freedom with Coach Gino Poore | May 9th at 8:30 PM EST on YouTube
Join Coach Gino Poore (a.k.a. The Theta Maker), veteran trader, co-founder, and CIO of Tackle Trading in this exciting webinar where you are going to learn the 3 ways that options trading can transform your life in the financial markets:
① Low Risk, High Returns: That is the true power of options: LEVERAGE. You are going to learn how to unleash this power.
② Generate Cash Flow = Passive Income: How to use the power of options to generate cash flow and compound those gains to achieve Financial Freedom.
③ Protect your Assets: How to use the power of options to protect your assets.
You don’t want to miss it!
Video of the Day: How to use leverage to control an expensive stock
In this video, Coach Noah Davidson explains how you can use leverage to control an asset using a fraction of the money you think you would need to buy that asset.
Chart of the Day: Devon Energy ($DVN)
Earning season has been mighty uninspiring this quarter. But there have been some bright spots! After delivering impressive numbers, Devon Energy, surged 10% on Tuesday.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
The Coaches Show Replay
If you missed last night’s episode where Coaches Frank Martin and Greg Holmes talked about Finding and analyzing trades or would like to watch it again, check it out here.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
Trade Masters 7:00 PM EST
Every Wednesday at 7 PM EST join us on the Trade Masters where two Coaches go head-to-head to see who can find the best trading setup.
Trading Justice 474: Interview with David Keller
In this episode, we bring in David Keller (@DKellerCMT on Twitter) to talk about current market conditions, daily routines, proper mindset, the most common mistakes beginner traders make, and the first trading book he’d recommend for any new student of the markets.
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