Why Are Leaps Good?
The Bottom Line Most Buy-and-Hold Investors and Index Investors Are Not Aware That Leap Calls Can Be Used as a Source of Investment Debt. Using Leap Call...
The Bottom Line Most buy-and-hold investors and index investors are not aware that LEAP calls can be used as a source of investment debt. Using LEAP call options is more complex than purchasing stock on margin, but the rewards can be a lower cost of capital, higher leverage and no risk of margin calls.
What are the benefits of LEAPS?
LEAPS puts help investors benefit from price declines without the need to short sell shares of the underlying stock. Short selling involves borrowing shares from a broker and selling them with the expectation that the stock will continue to depreciate by expiry.
When should you buy LEAPS?
As a starting point, consider a LEAPS call that is at least 20% of the stock price in-the-money. (For example, if the underlying stock costs $100, buy a call with a strike price of $80 or lower.) However, for particularly volatile stocks, you may need to go deeper in-the-money to get the delta you're looking for.
Alexander Ross has covered the video game industry for a decade, writing deep dives on game design, esports tournaments, VR developments, and gaming culture.
