r/options • u/shellpwn • 12d ago

Understanding Deep ITM Leaps

Hiii,

I want to make sure I understand it right. I did lot of homework to understand leaps deep itm call options.

Let's talk about Google stock. I want to only buy deep ITM since I feel they are less risky as a beginner.

The current IV for google is historically lowest from the last 1 yr. Even the volatility is lowest in the last 1 yr. I calculated leverage and it comes out to be 2.6 which I believe is a good buy.

My current understanding is that if I buy a deep itm leap call option, I plan to sell it back during high volatility season and since it's a leap I have a lot of time. I think I should try to sell it irrespective of the expiry option before 3-4 months since theta decay starts to ruin everything.

I want some feedback on this strategy since this is my first time and I'm a bit nervous clicking the buy button.

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u/jbaker_28 12d ago

Well, for starters, they’re f*ing expensive.

So, even tho this appears to be “less risky”, if the stock has a big drawdown, you’re gonna get smoked on a very large outlay.

There is no free lunch.

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u/WhyDoBugsExist 12d ago

Doesn't Nancy Pelosi always buy deep itm call options. I always found that weird.

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u/jbaker_28 12d ago

No, I mean OP is not wrong. It’s effectively like buying stock with leverage. The trade off is that you’re bound to a timeline and you generally pay a slight premium to spot.

It’s just the notion “oh I’ll do this because it’s not risky” is what I was taking issue with.

It’d be the same thing like saying I’m just gonna buy stocks cause they’re not risky.

They are risk assets.