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Options In Action: Why Mike Demands 20% Return on Buying Power Before Every Trade
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ticker lesson
Breakdown
0:00lesson
Notional value vs buying power
- Notional value = exposure to product
- Long options risk = debit paid
- Short options risk = notional exposure
- Buying power ≠ max loss
1:51CL· ticker
Crude Oil — $7,900 product, notional exposure $7,600
- Selling put at 79 strike = $7,600 max loss
- Buying power requirement = $886
- Return on capital = 20%
- Shift notional risk with strike adjustments
3:53MES· ticker
S&P 500 E-mini — strangle with $37k notional risk
- Strangle at 7500/7700 = $1,500 buying power
- Unlimited upside risk
- Defined risk via strike adjustments
- Absorb 10-30% sell-offs
5:42RTY· ticker
Russell 2000 — $150k notional via at-the-money put
- Sell at-the-money put = $500 premium
- Notional = $150k
- Return on capital = 20%
- Shift risk via strike adjustments
7:326J· ticker
Japanese Yen — $77,500 notional via 77.5 strike
- Sell at-the-money put = $500 premium
- Notional = $77,500
- Return on capital = 20%
- Shift risk via strike adjustments
9:206A· ticker
Australian Dollar — $70k notional via 70 strike
- Sell at-the-money put = $500 premium
- Notional = $70k
- Return on capital = 20%
- Shift risk via strike adjustments
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