LEAPS Options Explained - How to DOUBLE Your Stock Returns

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Long-Term Equity Anticipation Securities (LEAPS)
What Are Long-Term Equity Anticipation Securities (LEAPS)?
Long-term equity anticipation securities (LEAPS) are publicly traded options contracts with expiration dates that are longer than one year, and typically up to three years from issue. They are functionally identical to most other listed options, except with longer times until expiration. They were first introduced by the Chicago Board Options Exchange (CBOE) in 1990, and are now ubiquitous.
As with all options contracts, a LEAPS contract grants a buyer the right, but not the obligation, to purchase or sell (depending on if the option is a call or a put, respectively) the underlying asset at the predetermined price on or before its expiration date.
Understanding Long-Term Equity Anticipation Securities (LEAPS)
LEAPS are no different from short-term options, except for the later expiration dates. Lengthier times until maturity allow long-term investors to gain exposure to prolonged price movements.
As with many short-term options contracts, investors pay a premium-upfront fee-for the ability to buy or sell above or below the option's strike price. The strike is the decided upon price for the underlying asset at which it converts at expiry. For example, a $25 strike price for a GE call option would mean an investor could buy 100 shares of GE at $25 at expiry. The investor will exercise the $25 option if the market price is higher than the strike price. Should it be less, the investor will allow the option to expire and will lose the price paid for the premium. Also, remember each options contract-put or call-equates to 100 shares of the underlying asset.
An investor must understand that they will be tying funds up in these long-term contracts. Changes in the market interest rate and market or asset volatility may make these options more or less valuable, depending on the holding and the direction of movement.
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#TradingOptions #LEAPS #DeepInTheMoney
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DISCLAIMER:
This video is for entertainment purposes only. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.
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[@JakeBroe]

Give this video a LIKE to support my channel! Also check out my entire playlist on Trading Options here! kzbin.info/aero/PLscTZuOqKWIxSZzy4ObKWDznEsCot_1HU

[@webguyz1]

Finally, someone who wants to actually teach without charging an arm and a leg, while knowing that most traders lose money when trading options.

[@carsonc1272]

Thanks for the video! As of today (June 29th 2022) AAPL price is strangely very close to where it was in the video at 139.23. The option contracts mentioned are at... 135 call @ 19.55 vs video @ 22.85 = -16.87% 70 call @ 71.35 vs video @ 66.45 = 6.85% Results so far are in line with the video. It's interesting to think about all of the things that have happened since this video was made and know that either of these options were better than what my portfolio has done in the same amount of time. Btw...52 week high on the 70 was @ 112 and the 135 was @ 54 So a person could have roughly doubled their money if they sold well. That's on a roughly 40% move up in AAPL. Give this a thumb so others can see it too.

[@manavshahboisss4701]

Now it’s at all time high of 225

[@ForGodsGlory70]

I love LEAPs. I have a very nice profit from a 2 year LEAP come the end of this coming week. Profit will be over $15K from this one LEAP! Great way to start 2022!

[@JakeBroe]

Wow! That is a great start to 2022 Summer! Congrats!

[@garthmccarthy4572]

Always great!!!! Such a powerful channel. In fact one of the best I have seen. Absolute value add.

[@jimgeyer3475]

Outstanding Commentary!!! Priceless!!! Thank You!!!

[@samb.744]

Excellent explanation Jake... this is so valuable & thanks

[@SatyaSanathani]

Thanks for the information. Very concise and to the point.

[@dannykantar]

Really helpful and well done! Thanks!

[@wolfgangi]

Great video again Jake I'm loving these option strategies ! Keep them coming please!

[@JakeBroe]

Will do Wolfgang! I've got a big video on an options trading strategy coming this week that is an original idea. Be sure to check back for it!

[@joshuaisemperor]

damn, I learned a lot of nice new things. Thanks for the video, you got yourself another sub!

[@BoomBurster]

Dude I just went insane alll night learning this. Just put down a $1,300 leap before CPI, thank you for putting me on

[@orgelssecondrule9221]

You are for sure might go to when I want to get comfortable the way that I think about these concepts I have a learning disability when it comes to math although they weren’t calling that when I went to school. As you can imagine trying to conceptualize options is not easy for me. so thank you for your explanations and the way that you do so.

[@moxiangmingxin]

Great video, thanks!

[@wingzero8986]

this is the best options trading learning tool on youtube. you gotta do ALL THEM.

[@JakeBroe]

Thanks Tiger! More options videos coming soon!

[@hassanem8731]

Hi Jake I don’t know how to thank you enough for making this videos. The videos has improved my trading strategy enormously

[@JakeBroe]

Awesome Hassane! Glad you are taking away good info from them!

[@ctkmobambi]

Another good 1......👍👍👍

[@danielmorales1981]

Thank you so much for your tutorial vids

[@davidpearce4838]

This is excellent. Thanks Jake!

[@JakeBroe]

Thanks David! Cheers!

[@pjsriman]

Jake, I have been avidly following your different videos on options and big fan of your narration style and thinking power, thank you ! In this video, you are implying that the second scenario, buying a call option “deep in the money” is the most superior scenario right ? The only con vs the first is that it ties in a higher premium (or higher capital to play the same price movement) but to your point, bulk of the premium goes towards building intrinsic value …that’s what I gathered you saying.

[@eliefeinstein6182]

Great video, Jake. What are your thoughts on using LEAPS versus other forms of leverage such as margin? I would love a video comparing the various options for leverage.

[@DansChessLounge]

Appreciate the video. I didn’t understand why the strike prices decrease on the in the money contracts. I kept thinking are we betting on the stock price plummeting 😂. But you explained it beautifully, it’s strike price plus premium equals breakeven. Thank you!

[@creditmark]

This is a great strategy! Thanks for sharing Jake!

[@JakeBroe]

Thanks for watching Mark! Cheers!

[@joshuaisemperor]

6:36 brought up a question for me. When you have a (deep) in the money (call) option, would the following be true. Suppose we own the option in the video and during those 690 days the price of the underlying stock does not change. Then the intrinsic value should remain the same right? But does that mean that theta decay only eats away the premium part of the extrinsic value of the option?

[@matthewsherwin8741]

Wow man this is easily the best coverage of this topic. Thank you!!! I have to study this further by watching this again maybe even twice (or thrice) to make sure I understand this thoroughly. You really work hard to help people by educating them and I admire that.

[@JakeBroe]

Thanks Matthew! I think this is an interesting options strategy and I am tempted to go heavy on it the next time the market takes a huge dive.

[@matthewsherwin8741]

I’m sure I speak for many more people than just myself when I say I look forward to it!

[@TravelsoFun]

lol it is 07/01/2024 and Apple is now at $216.75. This was achieved 3 years after this video was made!! A-m-a-z-i -n-g! I’m buying Leaps in Apple and Palantir.

[@willberger96]

Great video!

[@paulsaliga1989]

Thank you for the help

[@mrwsilva1]

Great video Jake, very informative, love these videos. Can’t wait for the “poor man’s covered call” and vertical spread videos.

[@ryangrant5879]

I’d like to see what all those options strategies are on Schwab

[@mrwsilva1]

@@ryangrant5879 Same here, and any other option strategies I’m unaware of, just yet. Schwab all the way haha

[@JakeBroe]

Thanks Mr. Silva! Poor Man's Covered Call video goes live on Sunday!

[@mrwsilva1]

@@JakeBroe Awesome, looking forward to it. While you're at it, do you plan on making videos explaining option strategies available in higher option levels in your brokerage?

[@flex19112]

What is the highest percentage gain to a breakeven you would buy? Is 50% unreasonable?

[@fpost337]

Love it. Would like to see your poor mans covered call strategy

[@joseperez-ih7hi]

If you are really bullish on a stock do you recommend a ITM with a higher delta to mimic the movement of the stock. Or do you recommend a OTM with a 65 to 75 delta? Also, can delta move throughout the contract?

[@deviambati3805]

Hello Jake, first let me wish you Happy Christmas with lot of happiness, good health, abundant wealth and above all help the society in sharing your knowledge. I was so ignorant of difference between a long call and LEAP - you made it so simple. Thank you so much again. I was buying long calls so far, now should look into LEAPS, at least one or two stocks. I have aapl long call. Which other stock do you generally buy?

[@JakeBroe]

Glad you found the video helpful Devi! As for what I buy, you can see all my current positions in this playlist: kzbin.info/aero/PLscTZuOqKWIyTxElpV3mROcA6BhBnYz4c

[@Aquilesb]

Very good video, thanks for all this content, it is very valuable

[@JakeBroe]

Thanks for watching dralerma! Glad people are finding it!

[@tedsfinance8517]

When should you close out the leap? Ignoring taxes. If the price skyrocketed in 6 months would it be wise to close out?

[@dutchryans3363]

Great analysis, however if you add back the dividend then the difference about 2200. I think you can make it up by secured put. Over great stuff.

[@Unplugged704]

For the LEAPS, if the price of the stock goes down, you can still SELL To CLOSE just like a normal option correct?

[@user-mx8xg5ex6f]

you mean to say that if I want to do put option in leaps option I cannot able to do ya

[@yieldmaxetfreview]

Amazing training! So, lets say Tesla is tanking and is at 150 share price and $37 million is bought on Tesla 230 Puts that expire on June 21st (2 months away) would that person make a ton of money if tesla continues to tank?

[@user-mx8xg5ex6f]

can I allowed to close my option contract before expiration

[@RHEYMS]

Love LEAPS - I have Apple calls for March 2023

[@JakeBroe]

Nice RHEYMS! You can't lose money on that considering how much in stock buy-backs AAPL will be doing between now and then.

[@keatonlitzenberg1762]

you should do a video about long and short straddles and strangles.

[@JakeBroe]

Sounds like a good idea! I'll look in to it!

[@tempqwerty923]

Hi Jake, let’s say I don’t have enough buying power to sell call and I do a poor mans covered call. If the current stock price falls below my strike price, I need to sell a 100 shares. But since I don’t have buying power, will my leap get sold?

[@babygamer405]

Just bought my first leap base on your video. I've been doing good with cash secure put but like to try a leap for the experience. I bought AAPL one year out, we will see, finger cross.

[@JakeBroe]

Congrats Tommy! I also have calls on AAPL for Jan 2023 right now! So let's hope it goes well for both of us!

[@deviambati3805]

I bought AAPL with 135 strike for Jan 2023 few weeks back, so can I say it is LEAP? So I should start learning Poor-man’s covered calls. Thank you Jack, I am becoming more and more confident in trying the options with your videos.

[@nicks8459]

Enjoyed it, thanks. If only I could buy Long-TEAS in my IRA accounts, that would be cool. Alas, I'll probably just stick to buying 2-6 month calls / puts in my brokerage account and buying stocks in my IRA.

[@headlibrarian1996]

Why can't you buy LEAPs in your IRA? There is no legal restriction preventing it.

[@gandmemoney]

Thanks but you never gave the upside, say apple goes to 200 . What would the leap be and could you exit early.

[@Candychocolove1]

I been watching your videos, you explain everything well and I understand it. I want to start doing call and put options but when I look at the options/choices, I panic. Oh I just got approved for level 1 on Schwab 😂🤣

[@JakeBroe]

Congrats on your approval Jes! There is no rush to jump in to it. Take your time!

[@misaelarredondo7933]

Don’t mind all my comments Jake! Not spamming just doing it for the algo.

[@JakeBroe]

The algorithm loves you and there is not such thing and commenting on too many videos. I appreciate it!

[@AntonioInvests]

I love LEAPS 😁

[@JakeBroe]

A stock buyer's cheat code for sure!

[@creditmark]

How far in advance do you film videos?

[@JakeBroe]

Hey Mark! For my job in the Air Force I deploy to the missile fields for a week at a time every 3rd week. So I sometimes film a video a week or two in advance to schedule its release so I can keep posting content when I am deployed.

[@westcoaststacker569]

What happens to the leap options when shares are split? Does the strike price split also?

[@JakeBroe]

Yes, if there is a stock split, then all contracts are adjusted.

[@davidpearce4838]

Great explanation Jake. Thanks. I’ve been wondering how your portfolio has been performing recently since you giving up your investing videos in favour of those on the invasion of Ukraine. Hope it’s recovering🙂

[@cosmocamron7732]

What is your strategy when the price of the 100 shares assigned to you begins to tank?

[@stevenbi7495]

Are Leaps and Vertical Spread Option level 1 on Schwab?

[@JakeBroe]

Definitely a higher level than 1.

[@forextechnician7709]

Isnt it that you want to buy cheap premium leaps on great stocks so that the premium of your contract increase over time?

[@andrewdornan3942]

wait, once i pay the premium for a LEAPS, do i have to pay anything else to exercise the contract?

[@JakeBroe]

No, you pay the premium and that is it. Costs nothing to exercise.

[@antiquarian1773]

If Apple goes to 200 by the time of expiration. How much money would you make compared to leap contract and owning 100 shares? Edit: nevermind I figured it out, the profit should be the same as owning 100 shares however you paid less to get in. So leaps offer a leveraged profit.

[@headlibrarian1996]

I wish I had the foresight to put a bunch of money into Amazon when it was $5. $10k would be worth $6.8 million now.

[@JakeBroe]

Shudda wudda cudda! Next best option is to find that gem stock today!

[@jarrettpierce5626]

i dont think ill buy another stock outright, the ROI on these is so much more with little risk

[@deter78jg]

Should've been street named long teas... too bad ToS didn't consult with you. 🤣

[@Antonin1738]

kinda late, but still salty I didnt buy a leap during the crash where AMD went to 70$

[@InfoMentors]

What about taking into account the tax implications of the call expiring at the end of the two years causing a long-term capital gains tax, versus having stocks in definitely carrying over the capital gains tax perpetually or til you encase in retirement etc,?

[@JJ-nu8qi]

Being in the military you should know acronyms don't always make sense.

[@JakeBroe]

Haha, truth!

[@behrensf84]

That’s risky... I like the wheel strategy better.

[@JakeBroe]

Yep! LEAPS are still on the buying side of options. Sellers assume less risk.

[@AeschylusShepherd]

Yeah a family member lost everything using leaps. It’s because they didn’t understand what they were doing and listened to someone who took everything!

[@smartdogschoolrandybyrd1704]

How can anyone lose “everything” with a Leap?

[@benyameenyitzhak1036]

​@@smartdogschoolrandybyrd1704my question exactly

[@xkrimzonxrsps]

​@smartdogschoolrandybyrd1704 put 100% of your net worth into some 200$ strike 1 year out on some degen stock like bed bath and beyond and soon enough you'll be in bed reading what chapter 13 is about

[@alphabeta01]

great video. can you pls share your experience from the latest set of shares and if you are taking any new LEAPS positions on ARM or NVDA. Thanks for sharing.