Gaining Exposure 	 	•	 193
On the rare occasion in which we find a company that has a valuation 
range that is far different from the present market price (either tight 
or wide), I would rather commit more capital to the idea, and for me, 
committing more capital to a single idea means using less leverage. In other 
words, I would prefer to buy an ITM call and lever at a reasonable rate (e.g., 
the −1.8 × /2.6 × level we saw in the Intel example earlier). Graphically, my 
approach would look like this:
Advanced Building Corp. (ABC)
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5/18/2012 5/20/2013 249 499 749 999
Date/Day Count
Stock Price
GREEN
ORANGE
Here I have bought a deep ITM call option LEAPS that gives me lev-
erage of about −1.5/2.0. I have maximized my tenor and minimized my 
leverage ratio with the ITM call. This structure will allow me to profit as 
long as the stock goes up by the time my option expires, even if the stock 
price does not hit a certain OTM strike price.
In the more common situation, in which we find a company that is 
probably about fairly valued in most scenarios but that has an outlying 
valuation scenario or two that doesn’t seem to be priced in properly by 
the market, I will commit less capital to the idea but use more leverage. 
Graphically, my approach would look more like this: