Ok, you may call me crazy on this one, and believe me, I would not blame you. 2x and 3x ETFs and their inverse will slaughter any options speculator. With that being said, and letting you know this seems like a highly unlikely profitable trade, the potential reward on this trade is immense. If it does happen, and you do profit the expected return, you may just end your career and retire at an early age! Make this trade, with the assumption, YOU WILL GET STOPPED OUT! This trade should very well show what averaging in, and staying power can really accomplish.
The profit curve on my charted spreadsheet is so skewed I will not even list it. We will use January 10 Calls (lot size 1), I will also list the profile for a stock play, the listed lot size is 100 shares. You can scale it down in whatever lot size you like with the stock play and take % proportions to the other data output. For instance, if you use 25 share lots, take the profit/loss data to 25% of the currently listed numbers. The lot size on options contracts can not go any lower than 1 contract unfortunately.
On this play, you can use contracts that are nearer "In the money", but the loss percentage on being stopped out will go almost to 100% of the allocated capital for the trade.
10 January FAZ calls! (all quantity 1 lot)
Entries
25.59
23.55
21.78
20.23
18.89
17.73
16.71
15.83
15.06
14.39
13.81
13.30
12.86
12.48
12.15
11.86
11.60
11.39
11.19
11.03
Option Profile:
Capital allocation requirement: $13,327
Stop: 10.53
Profit Range: 37K to 527K (yes, you read that correct, 527,000)
Stop loss: $8,900
Stock Profile (100 share lot)
Capital allocation requirement: $31,143
Stop 10.53
Profit range: 37K to 703K
Stop Loss: $10,086
Note the % difference on allocation to stop loss ratio (estimated 75% compared to 33%), this is one of the primary advantages to playing stock over options.
