/biz/ - Business & Finance

>>26442508
Exactly, when you get options that are this much itm you are effectively buying the underlying with a high leverage ratio. Consider pic related: if the stock goes up 40%, you get 96% returns, which is about 2.4 ratio.
The curves are of course not linear, they're more like a convex curves: the further away from even the price is, the higher the leverage ratio. Selling put has the opposite effect: the closer you are from flat, the higher the ratio, and the further you are, the closer to 1.0 you get.
A target ratio range can be established by estimating what range of outcomes are likely and targeting them with a selected deep itm strike. This appears to be the play here, assuming this is not some kind of hedge. The deeper itm you go, the flatter the breakeven line and the lower the overall leverage.
The example is aapl 105c 09/2022.