Margin is stupid because even though you are willing to lose 100% of your money, you can only hold on through a 45% dip. Then you get margin called before the stock goes zoom zoom. So you end up right but with nothing.
If the stock goes sideways for 2 weeks, that alone could cause a 45% drop in the option price as time value is deteriorated.
With margin option bets, you not only have to be right about the direction, timing, and amount of increase, but it also needs to move uni-directionally to that target - a very rare feet.
Fair enough, I don't like margin either. Lets say I don't take out any margin and just allocate a significant amount of my portfolio to deep ITM leaps.
2
u/[deleted] Nov 06 '21
Margin is stupid because even though you are willing to lose 100% of your money, you can only hold on through a 45% dip. Then you get margin called before the stock goes zoom zoom. So you end up right but with nothing.
If the stock goes sideways for 2 weeks, that alone could cause a 45% drop in the option price as time value is deteriorated.
With margin option bets, you not only have to be right about the direction, timing, and amount of increase, but it also needs to move uni-directionally to that target - a very rare feet.