Originally Posted by milmoose
The options point is a good one, but transaction costs tend to be a bit higher than with futures. I know the risk of the futures and would be limiting myself to 2.0X leverage, so I'm not too worried about margin calls (unless the index drops > 50%).
You'd have to roll your futures, which would increase transaction costs (including slippage). The farthest out Russell 2000 contract is Sep07.
Do I understand 2x leverage to mean you'd hold 2 contracts and keep one full contract amount as the performance bond? I.e., you'd hold 2 ER mini-contracts and keep ~$77000 in the futures account?
With $77000, you could hold 100 Jan09 strangles for the QQQQ at 10% OTM. That gives you 2 years for a >10% movement. The transaction costs would be $200 total, depending on the broker, and it would be 100% long-term capital gains, as well. That alone could save you $200.