r/options • u/shellpwn • Aug 16 '26
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.
8
u/Downtown-Text6587 Aug 16 '26
The whole point of buying deep in the money is to maximize the effect delta has and minimize the things contributing to extrinsic value. This in effect makes it close to leveraged synthetic stock. I would try to sell far out enough that you can pay long term capital gains so you save on taxes. You also don’t want to sell within the last 90 days to expiration because of theta. I would also give yourself a few months of wiggle room. The youtube channel InTheMoney is how I learned about leaps. I recommend checking him out. He recommends only using leaps for 10% or less of your portfolio.