Mark19,

A DITM call, is darn close to buying shares on margin. The advantages of the calls over actual margin is:
1) often the implicit interest rate using the call is lower than the actual interest rate using margin
2) You don't even in theory have to worry about "margin calls" causing your losses to go through the roof. Using calls instead of buying stock on margin limits your possible losses to "only" everything you invested in the call.

Its a strange world where having your losses limited to "only" everything is an advantage, but read the horror stories of margin calls before you go further. LOTS of people lost more than the entire value of their brokerage account and did in fact have to raise money to give to the brokerage to climb back up from zero. At least with DITM calls, you are not subject to margin calls.

By the way there is nothing magic about a Delta of 100. First of all, the Delta of the option you buy will change as the underlying stock price changes and also just as time goes by.

In my opinion, the most important thing to realize is you are PAYINING for margin no matter how you get it. And MARGIN does this: when the stock does better than expected, you MAKE EXTRA MONEY. Yay! But when the stock goes sideways for a while, you lose money on your DITM call, so you are losing money paying for your margin, whereas if you just owned the stock, the price going sideways for a while is frustrating, but not costing you anything.

CONCLUSION: Using Margin is like having a high performance car. When things go well you get there faster, but when things go poorly, the regular cars get there anyway, but you spin out in a turn and slide down the side of a hill. Most of us are not above average drivers, so you do the math.

R: