How to leverage an SP500 strategy?

Question

I have a back tested strategy for daily trades of large cap ETFs. The expected return is 0.30% (60% confidence). The strategy is reliably and is not correlated to market movements (backtested across 2 decades worth of data)
I want to leverage this in order to increase my returns. Anyone know how?

Straight equity and leverage: I would need millions to get decent returns and at that point I risk losing my expected value due to sheer size of trade. Also, I don't have millions ...

Options: I tested using 2 month out options but, see the attached images as example, they don't move with underlying asset. Main concern is that even though share price had a positive return over the day, the option moved downwards.

Bob Baerker · Answer

If you're in the U.S., a pattern day trader gets 4:1 intraday leverage (although some brokers raised it to 30% prior to the election due to the expectation of possible increased volatility).
If your strategy isn't robust enough to profit from such leverage then it's not going to cut it with options due to possible combinations of reduced delta, time decay (if held longer than intraday) and wider spreads than the underlying.
An alternative might be E-mini futures for smaller trades and the SPX for larger ones.

canweprogram · Answer

[Solved] deep in the money options move a lot more in sync with underlying asset and they can be leveraged for the strategy I had.

How to leverage an SP500 strategy?

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