A trading strategy that involves the use of excess margin or “buying power”, in a successful speculative endeavor, in order to increase a position or portfolio size by capitalizing on unrealized gains as a means of leverage. A trader following such a strategy basically aims to commit more funds to a speculative position. For instance, a naked option seller may write more options as the price of the underlying moves favorably and frees up margin, leading to unrealized gains.

Pyramiding will only be beneficial  in a heavily trending market, since short term corrections will expectedly eat into previous gains, leaving traders with meager, if any, positive results. Pyramiding is typically more popular among futures traders than option traders, because margin requirements on futures are often lower.

This trading strategy was applied by one of the greatest traders of all-time, Jesse Livermore.