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Control the Stock for a Fraction of the Cash. Here's the Catch.
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ticker lesson
Breakdown
0:00NVDA· ticker
Nvidia — stock vs call cost comparison
- Stock at $198/share requires $9,900 for 100 shares
- Call option 170 strikes at 83 delta
- In-the-money call costs 1/3 stock price
- Delta measures stock-equivalent exposure
2:17lesson
Call spread as stock replacement
- Long 170 call + short 205 call reduces risk
- Delta drops from 82 to 54
- Theta shifts to +$15/day
- Capital requirement reduced 66%
4:24lesson
Intrinsic vs extrinsic value
- 170 call has $374 extrinsic vs $3.05 put
- Interest rates inflate call premiums
- Zero rates equalize put/call extrinsic
- Extrinsic = volatility + interest
6:53lesson
Interest rate impact on options
- Positive rates increase call value
- Extrinsic value = $3.83 for 170 call
- Offset with front-month short calls
- Interest cost embedded in premiums
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