Master LEAPS: Picking Stocks for Long-Term Options

[@billassim9014]

Great information,

[@kimberlyrothman573]

Hi I am very new to options and trading generally. I recently wanted to try out a LEAP, and chose PLTR to do so. Realise now, probably wasnt the best stock as too low priced. I also bought the call deep in the money at 27. for a June 26 exp. It shows a profit on my trading account, but presume if I wanted to get out of it, I would lose money as it has a long way to go ? I am a bit confused as to the loss potential of exiting the trade as I paid $1700 for it which will essentially be lost, and perhaps not the liquidity to sell it? Sorry long message, but just trying to learn on these as I like hte theory of LEAPS!

[@JacobEdgerton-b9c]

No you get what you paid back along with the total profit. Kinda confusing the way some people explain it but you’re good can close the trade anytime

[@OptionStrat]

kimberly - PLTR is up very nicely in the last 7 days, so this position should be nicely profitable and while bid ask spreads might be wide, you could float a mid or even higher price you would be OK selling at and should get filled for a profit. Your MAX risk is the amount you paid for the long call and your max profit is unlimited. It also makes perfect sense to do this on a lower priced stock that you think might rocket up in the next year. You are essentially controlling and profiting on 100 shares that you only paid $1,700 for where if you had actually bought 100 shares, you would have spent 2- 3 times that amount. Now the question you need to ask yourself is whether you think this run will continue for the next 1-2 years and if the answer is YES - Hang on and go for the ride!

[@herbertzl]

This is really a detailed walk-through, very helpful. I think the difficulty is how to select the strike price. BTW, any idea of how OptionStrat calculates the "chance" when you change the strike price?

[@OptionStrat]

Thanks for the comments - as far as the calculation, I am not certain as I am not part of the technical support team, but you could likely reach to them.

[@iamericlentz]

I like to grab the leap and sell a pretty far out call, at a way nearer expiration that nullifies my theta but that is far enough out that I get a good profit if it hits that price at the short expiration. Basically, a wheel strategy, but without concern for earning much on the short position.

[@OptionStrat]

Absolutely, that is called the poor man's covered call and I just did a video on it as well that you will find in this channel.

[@Jokersxsx]

Why not deep in the money and grab the delta?

[@OptionStrat]

Going deeper in the money is fine too, but of course it increases the buying power needed AND increases your corresponding risk in the trade too.

[@pepeperez-c9c]

Why not a ZEBRA instead?

[@OptionStrat]

Please understand that I am not promoting this trade over any other type of trade. I am simply showing examples of a variety of different trades. I will likely do a zebra at some point in the future as well - and this video was a little more about the fundamental analysis I go through for a long stock candidate than promoting a specific trade anyway.