Subject: Re: OT, more on my DITM leap strategy
identifying stocks trading 5-10% below their 52-week highs,
ok

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

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


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 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 recently found a broker who showed the deltas in the options chain, but cannot find it now. My main brokers only show it for one option at a time. Darn.

For GOOG, the farthest is Jan'2026. Lowest strike is 65 with delta 0.9797. Midpoint price is 97.5. GOOG is 156. That's 4.2% above current stock price.

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


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.

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I 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!

Pretty nosebleed on the MaxDD, though. -33% for QQQ, -79% for TQQQ.