No. of Recommendations: 1
When you buy a 160 strike on a day that the stock is trading at 225, you'll be paying $65 for its intrinsic value, as opposed to $35 on the day it's trading at 195. How is 65 cheaper than 35?? Yes, you might be paying a buck more for the time value on top of that 35. But if I had a wad of cash, looking to buy some BRKB options, I'd do much better when the stock is at 195 than when it's at 225, no matter what the volatility and time value.

That's profound, since the entire strategy is mean-reversion. The premium you pay for volatility away from that mean is the very volatility you want and presumably would be willing to pay something to get.

That said, is it fair to say you would prefer a calm day just after a big move where the VIX has just pulled back, but the price of your option price is still where you want it (less in the money)? Or is that just semantics and future telling that never works?

When is 2:1 leverage appropriate?

Clarification: When is 2:1 leverage appropriate within the rules of Jim's strategy?
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