“ And they are incredibly cheap. The DITM calls on XLE you can get 2X leverage at under 1% implied interest rate.”

Partially due to the relatively high dividend yield of xle I believe


Could be.
I struggle with figuring out how or why the dividends come into play on LEAPS.

For the Jan 27 calls, it looks like the total XLE dividends will be about $6.15 from now to then.

I did some searching and found confusing information. Very little on LEAPS, mainly on short time to expiration options.

"As a general guide, slightly prior to a dividend call options will fall slightly. ... Options will start pricing the stock price adjustment (related to the dividend) well ahead of when the stock price adjustment actually occurs. This implies micro-movements in the option price over time, which are likely to be overwhelmed by other factors."

"the Black-Scholes formula has limitations in valuing options on dividend-paying stocks.
"Since the formula does not reflect the impact of the dividend payment, some experts have ways to circumvent this limitation. One common method is to subtract the discounted value of a future dividend from the price of the stock."

That indeed changes the implied interest rate.

However, the first quote implies that the dividends are already priced into the option price.
As does the rule that "the market discounts all known information."

A few days ago, the Jan'27 XLE 50 had TimeValue of $0.88. I guess you could add something for the discounted future dividends, IF the option price has not taken the dividends into account.

Maybe you could get an idea by looking at options one month apart where there is a dividend between the two dates, and teasing out how much the computed implied interest rate changed. XLE has such---Dec'26 and Jan'27. It looks like historically the ex-date is just after the Dec expiration.