Dr. Jim emphasized the importance of assessing leverage differently for short versus long delta positions. For short delta portfolios, he recommends using a delta-theta ratio of approximately 0.5, adjusting theta levels based on market volatility (0.1-0.2% in low volatility, up to 0.5% in high volatility environments).

For long delta positions, he suggests measuring leverage relative to SPY, calculating beta-weighted delta as a multiple of portfolio size. A 1X leverage means portfolio delta exposure equals the notional value of equivalent SPY shares.

Most traders are likely over-leveraged without realizing it. Dr. Jim recommends beginners start with 1X leverage, with experienced traders typically comfortable in the 2-3X range.