Norm Let's use the numbers in your post. I'd like to discuss the difference between deep in the money calls and borrowing money to buy shares. In your example of in the money calls you are paying a premium of $1.20. You have paid for the portion of the share price above 20. The strike date is 2 years away. So the 1.20 is similar to a 3% loan (.60/yr for 2 yrs). Suppose I borrow the $20 (from a bank where I can get close to the 3% not my broker) and use cash in my account for the remainder of the share price. Please discuss how you see the difference in risk/reward in the approaches. One difference is dividend.
Advantages - Several months ago I bought bbt 2013 call contracts - strike 20. I paid around $450 per contract where 1 contract equals 100 shares. Basis for buy was that bbt share price would double by 2013 and my $450 investment for 100 shares would give me a 5 to 6 bagger on my investment.
Disadvantages - no dividend, 3% annual call premium, less liquidity, sizable spread between bid and ask.