/biz/ - Business & Finance

>>51044907
I look at premiums on the different strikes and determine what my break even is. From the breakeven, to make 100% on my investment the stock needs to increase by my premium.
I then compare this with what the stock price is and 2x the stock price is (100% gain)
Basically I see at what point I break even and then once at that point, what type of leverage do I get for any $1 increase over the breakeven and compare this to just buying the shares straight up.
>TQQQ share price is ~$32
>Jan 24’ 25P
>premium is $15
>breakeven is $40
>2.13x leverage on additional upside above $40 (32/15 = 2.13)
>would need a 25% gain from 32 to breakeven
>$55 a share you would 2x your investment
>$55 is a 71% gain from $32
Based off this, for me it doesn’t seem worth to buy the $25 strike for a 15.00 premium.
I would be up 71% if I just bought TQQQ straight up vs up 100% in the case I bought this particular contract.
If TQQQ closes anywhere below $40 in January 2024, you lose money with the call.
Buying the shares straight up you still have your shares and can wait for line to go back up and only lose money on anything below $32