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Trading LEAPS is one of the easiest ways to use options in a portfolio, and it’s my favorite strategy by far. LEAPS provide leveraged returns compared to the stock, so if the stock goes up 10%, a LEAP on that stock might go up 50% or more depending on the contract. This makes trading LEAPS an efficient way to use capital, especially for small accounts.
A $15 stock like SOFI costs $1,500 to buy 100 shares, while a trader could by a 1.5 year call option for $500 and get 75% of the exposure of buying the shares at the time of entry. If SOFI goes up, the LEAP call can appreciate significantly more. The leverage goes both ways though, as downside stock movements will result in larger losses on the downside percentage-wise, but with less risk in dollar terms if comparing 100 shares vs. 1 call LEAP.
In this video, you’ll learn everything you need to know about LEAPS, including how to choose a strike price, the time decay and implied volatility advantages, and best practices when executing trades.
==== Video Chapters ====
00:00 What Are LEAPS in Options Trading?
01:35 How LEAPS Provide Leverage
03:06 Real LEAPS vs. Stock Return Examples
04:18 Strike Price Selection Tradeoffs
06:30 Why Buying Deep ITM LEAPS is Most Conservative
09:05 Pros & Cons of LEAPS vs. Stock
11:09 Trade Execution Best Practices
12:23 Learn This LEAPS-Based Strategy Next
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Disclaimer: Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction, or investment. Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past performance is not necessarily indicative of future results. I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make.
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