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Why the LEAPS Options Strategy is Best (Long Call Options Explained)

The LEAPS options strategy is a powerful way to magnify the returns of your portfolio. I'll explain how these long call options work and how they can be used to get higher returns than investing into stocks directly. 00:00 - Intro 0:42 - Buying Call Options Explained 2:52 - Call Options Value Explained (Intrinsic vs. Extrinsic Value) 4:21 - How Call Options Beat Shares of Stock 6:16 - LEAPS Options Strategy Explained 8:59 - LEAPS Warning + Tips 🚨 Subscribe to the channel: https://bit.ly/2SfWumJ 🚨 ••••••••• LINKS & RESOURCES 📈 Start investing in on the platforms below for FREE stocks & more: WeBull: https://act.webull.com/po/y2btyphGBX3... (4 FREE stocks with $100 deposit) Robinhood: http://join.robinhood.com/tylerm27 (Get a free stock up to $500!) M1 Finance: https://m1.finance/apNm3hKCZsWC (Get $10 free!) Interested in camera stuff? Here's the equipment I use to shoot my videos: https://amzn.to/3jE8Ktp ••••••••• The LEAPS options strategy is a powerful way to magnify your returns. Why? It enables you to leverage your money with reduced risk compared to other options strategies. LEAPS stands for long-term equity anticipation securities, but don’t let this poorly constructed acronym confuse you. Simply put, LEAPS is a lower-risk strategy compared to other call option strategies. LEAPS involves buying deep in-the-money call options with expiration dates at least one year in the future. Both of these components have some pretty substantial benefits. The first component is purchasing options that are deep in-the-money. This is when the strike price is below the current trading price of the underlying security. I personally love this deep-in-the-money strategy, because most of the option premium is made up of intrinsic value. This minimizes the impact of time and volatility on the investment, and it also means you need the stock to move much less to make a profit. The value of your contract will also fluctuate less over time as a result. The next component to LEAPS is purchasing call options with expiration dates at least one year in the future. Because time can be such a dangerous influence on the value of your option contract, securing yourself more time gives you a larger window for the underlying security to move up. It’s very difficult to predict stock movements in the short-term, so these longer expiration dates will improve your chances of success and profitability when investing with call options, thereby lowering your risk. Additionally, holding an options contract for longer than one year officially makes it a long-term investment, which means it will be taxed as such. If you trade call options within a 12-month period, you’ll be responsible for paying short-term capital gains on those trades. By holding it longer than 12 months, you’ll be eligible for the gentler long-term capital gains tax, which will allow you to keep more of your profits. Although call options can be intimidating and risky, the LEAPS strategy is a great way to control and minimize the risks involved. The longer time frame improves your likelihood of success and even gives you better tax treatment. All of these reasons are why I think LEAPS make a great options trading entry point. However, I want to emphasize one danger: LEAPS ARE lower-risk, but they are not risk free. It is still entirely possible that a stock drops below your deep-in-the-money strike price and you lose your full investment. I have some additional tips for navigating LEAPS with reduced risk. One strategy is to use LEAPS on total market index funds or ETFs instead of individual stocks. Although it may not be as exciting, a LEAPS strategy on something like the S&P500 can still help you magnify the returns of the underlying index without taking on the risk of individual stocks. Next: use limit orders with LEAPS, because deep-in-the-money call options typically have lower trading volume. If you place a market order, you may end up paying a much higher price for the contract than you expected, which could mean more extrinsic value included in the option premium, ultimately adding a little bit more risk. My final tip is to keep your eye on Delta. Delta is a number that tells you how much the value of your options contract will change with a $1 change in the underlying security. The closer you get to 1, the more your call option will behave like the underlying security. I personally like to secure options with a delta around .9, although it seems like most people recommend at least .8 or higher for the LEAPS strategy. #LEAPS #CallOptions #StockOptions ••••••••• DISCLAIMER: NOT FINANCIAL ADVICE. The content in this video should not be used as the basis for any investment decision, as it is for entertainment purposes only. Additionally, some of the links contained in this description are affiliate links. I may earn a commission via Amazon, WeBull, M1 Finance or Robinhood should you choose to purchase or sign up at the links provided.