No. of Recommendations: 8
...[What is] the "implied interest rate".
From a 2017 post:
"To calculate the cost of the leverage, this is the math I do
Likely purchase cost of option = .25*bid + .75*ask.
Breakeven = strike + cost of option
"Extra cost" = breakeven - cost of stock now + your after-tax amount of all the expected dividends
Borrow amount = stock price now - option cost (the amount of money you don't have to put up yet).
Raw interest rate = extra cost / borrow
Annualized = raw rate * 365 / (calendar days till expiry)."
And from a 2019 post:
"(how much worse the ending break even price is buying calls today versus buying stock today) /
(the amount lower the cash cost is today buying calls instead of stock) * 365 / (days to expiry).
Unless I made a typo, that's
((strike + .25*bid + .75*ask)-stockprice)/(stockprice - (.25*bid + .75*ask)) * 365/830."
==========================================
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.
I did say that there is HUGE volatility.
Also, you only want to hold a daily leveraged QQQ when QQQ is rising.
==========================================
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?
I am of the opinion that in a storm the best place to be is in a cave. Make hay when the sun is shining, shelter down when it is not.
The market is much more volatile during a bear market than a bull market. Using leverage with high volatility is dangerous.
You don't need to make profits in both bull and bear markets. It's okay to go to cash in bear markets. "Heads I win, tails I don't lose."
And that "Always Beats the Market" is just wrong. It's not "always". As Jim said, it's just leverage.
Kinda like card counting at Blackjack. When the odds are in your favor, bet big. When they are not, bet small.
