Subject: Re: OT, more on my DITM leap strategy
Since, I have pretty much finished the book, I can respond to everything you said.



exhibiting a consistent upward trajectory over time,
ok. How does he measure that? What period? RS? SMA? eyeball a chart? handwaving?<I/>

Believe it or not, more eyeballing.

possessing a competitive advantage or "moat."
Not exactly mechanical.

That is why I started with OT


tight breakeven point for the deep in the money (DITM) LEAP options he targets, ideally within 5% or less above the current stock price.

He will go up to having the Breakeven be 10% above the stock price, but prefers 5% or less.
...
He favors DITM LEAPs with a delta near one and expiration dates of two years or more.

What does he call "near one"? MSFT is 424, CBOE says the 215 (about 50% ITM) Dec'2026 call delta is 0.9611

I looked in the book, and could not find the delta quickly, but my guess is that, since the idea is to catch most of the gain of the stock, on the option, that .95 would be fine.



I think you'd also want to factor in what Jim calls the "implied interest rate".

Can some explain that to me?




Despite its apparent advantages, one might wonder why this strategy isn't more widely adopted.

You need to have tight risk control. If the stock loses 25% your option loses 40%. In the blink of an eye. Prices drop steeply but climb slowly.

How much would he have lost in 2022 when MSFT went from 335 to 224? 33% loss on the stock. Near 100% loss on a DITM call.

He addresses that quite a bit. He says that a lot of his options lose a lot of money quickly, sometimes in one day, but that he never panics, and just waits for the price to return. He is a Software Engineer with an MBA, so knows the companies very well.

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haven't written any books, but take a look at how buy&hold of TQQQ has done compared to QQQ. https://www.portfoliovisualize......

Last 14 years, QQQ up 10X, TQQQ up 132X. QLD up 50X.
They warn you against holding these 2X & 3X daily leveraged investments, but WOW!

If you go through the math with TQQQ, you will see why it is not a good strategy. Just go through five days, of simulated returns.

Now a question for you.

I have presented this strategy, and the other ones, "In The Money: The Simple Options Strategy That Always Beats the Market", and "In The Money: Bear Market Strategy: The Simple Options Strategy to Trade the Bear and Win"

Which of the two strategies do you think is better?

Thanks.