So say I wanted to make money off of a simple RSI-MACD algorithm on SPY (ofc this may not necessarily make money, but let's say it does). I'd like to leverage my returns using call and put options, but I'm not sure what kind of option would be best.
First I'd imagine I'd want to use weekly options that expire very soon since I'll only be holding a contract for max 60-90 minutes where theta decay should be manageable.
Though after that I'm really not sure about what kind of strike price would be best. Normally you'd want a deep ITM option so that you have a high delta and low theta, but I'm not so sure. One benefit of options that I'd like to maintain is the high leverage with low downside risk (in cases where trades go very wrong), and ITM options are expensive. Also, looking at options chains myself, I often notice that OTM options are usually more price sensitive % wise, all the while being much cheaper (and thus less downside risk).
Then there's also a case for Near-the-Money options because of the options smile, thus, in the case of the underlying moving either up or down, IV will increase, keeping my premiums (relatively) high. Though Near-the-Money options also experience more theta decay.
So what's the best bet? Or is there no best bet?