What Are LEAPS in Options Trading? (How to Magnify Stock Returns)

Рет қаралды 205,172

4 жыл бұрын

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Options traders mostly place trades with 30-60 days to expiration, but we are not limited to short-term trades. We can also place long-term options trades via LEAPS (Long-Term Equity Anticipation Securities).
In this video, I cover:
1) What are LEAPS in options trading?
2) What are the differences between short-term and long-term options.
3) How LEAPS can generate massive percentage gains relative to the stock price return over a period
4) Why implied volatility collapsing is not a huge concern when buying LEAPS call options.
5) Why LEAPS should be avoided on most stocks because of liquidity reasons (low open interest/volume).
I hope this video is helpful and you have a better understanding of how you can incorporate LEAPS in your portfolio, and especially if you have a strong directional prediction for a stock over the next year or so.
Be sure to leave a comment down below with any questions you may have!
=== RECOMMENDED VIDEOS/RESOURCES ===
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Options Trading 101: • Stock Options Trading ... tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Project Finance(Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade.

Пікірлер: 274

@projectfinance 4 жыл бұрын

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf As always, let me know if you have any questions about the video. -Chris

@johndowdall4801 4 жыл бұрын

Hi Chris, I saw in a video where you said there was a template sheet for logging all trades made in the description section and it could be downloaded, I can't find that video, could you add a link please? cheers

@projectfinance 4 жыл бұрын

kzfaq.info/get/bejne/ibOIf7ViuqmYpZs.html

@johndowdall4801 4 жыл бұрын

@@projectfinance Cheers Chris

@amarnathwaghmare7211 4 жыл бұрын

Hey chris, can u make a video comparing returns and losses of at the money, out of the money and in the money options in the same expiration cycle of the same stock so we can compare which is better assuming the risk is same that is delta is same..

@amarnathwaghmare7211 4 жыл бұрын

How much risk do u like to trade in, in terms delta.. I mean at which delta do u like to trade?. And what the realist return one can expect trading option if we trade for delta less than or equal to 0.3

@xtctrader1467 3 жыл бұрын

My biggest problem over the years when buying options (primarily Calls) is "timing". i.e. having option expire before stock moves. By using LEAPS with high Delta (deep in the money) I've become a lot more profitable.

@Consciousness317 2 жыл бұрын

💸💸💸

@gotya2006 Жыл бұрын

Yes, I always buy deep in the money to make it the most profitable.

@WhosYouG Жыл бұрын

Also time decay. Options premium decay faster when they are close to expiration.

@abuyusuf8374 5 ай бұрын

What stock do you trade usually. I want to learn

@denko44 9 күн бұрын

That's what Pelosi does 😂. Deep in the money leaps.

@utsav.sarkar 4 жыл бұрын

Best channel to learn Options trading! Great job man

@projectfinance 4 жыл бұрын

I appreciate that!

@mfalmog 2 жыл бұрын

Hands down.

@jamesbeck9301 3 жыл бұрын

This was extremely informative. I was thinking of doing leaps on a particular stock and now have a much better understanding of how it works. Thank you.

@mt7able 3 жыл бұрын

You are an excellent teacher. This is the 3rd option video I've watched and you are very thorough and systematic. Thank you so much for sharing this content with us. Much respect!

@alexandracunha8843 3 жыл бұрын

I just loooooove the way you teach us! Thank you 🙏🏼

@CHANDARAKEV 4 жыл бұрын

Fantastic video for LEAPS option, thank you.

@Youtube_Enthusiast_ 3 жыл бұрын

Thank you for your videos!!!! Life saving!!! You are doing good for so many people!

@smsr101 3 жыл бұрын

By far the best options channel. Keep it up

@tisurmaster 3 жыл бұрын

Will watch later. Thanks. Looking for pricing on leap.

@shayneedge7330 2 жыл бұрын

Hey Chris, your videos are outstanding! Clear, thorough and applicable...I'm primarily buying LEAPs now and wanted to ask 2 questions...1. Do you have a recommended profit goal for when you might sell to close LEAPs and 2. What are the pros and cons associated with buying LEAPs on leveraged ETFs? Thank you for all you do, sir!

@cajuninvestor8091 2 жыл бұрын

Great info and take-aways. Thanks, Chris!

@Maylando 3 жыл бұрын

i learn so much on this channel thank you chris, great job

@mylzebatyahoocom1 Жыл бұрын

this really cleared up a lot of confusion I had about the greeks, thanks!

@HefTrade 4 жыл бұрын

Solid video Chris. Learning "LEAPS" and bounds on both channels.

@projectfinance 4 жыл бұрын

Amazing haha! I’m glad to hear it. Much more to come.

@joshuabrown7771 4 жыл бұрын

It feels like you made this video for me :D Excellent explanation as always. Thanks!

@projectfinance 4 жыл бұрын

Haha I might have. Thanks for watching/commenting as always!

@Lil_mar00 3 жыл бұрын

I started trading LEAPS last year. It's just so much easier not worry about the day to day while still leveraging options. Great video! I learned a bit more :)

@JK-vb9ps 3 жыл бұрын

Assuming you're bullish u do a leap call option. I'm thinking the same but long a synthetic spread with a protective put. The P/L chart will be similar to just a long leap option but cheaper. What do u think?

@nandocame620 8 ай бұрын

Synthetic spread, please elaborate @@JK-vb9ps

@jimmyfelton2825 4 жыл бұрын

Will definitely be checking out your other channel I have learned so much from your videos... Great content thank you!

@projectfinance 4 жыл бұрын

Awesome, thank you! Glad to have you as a subscriber on both channels!

@zadokmotorfreight2423 19 күн бұрын

Excellent video, thanks!

@projectfinance 19 күн бұрын

You’re welcome thanks for watching!

@babaksadjadi9396 3 жыл бұрын

Great channel to learn options with so much detail explanations. You are doing great, I recommended your channel to all people interested to learn options. I am a bit puzzled that why deep in the money Leap call options have very little extrinsic value. This make it much less risky strategy. Can you please comment?

@Murphys_Law9 3 жыл бұрын

Options is the way to go for me thanks for explaining this 🔥

@ScarsofApathy 3 жыл бұрын

Very helpful, thank you 👍

@mamu7mich 4 жыл бұрын

I was lucky enough to buy XLE 2022 leaps right when it bottomed in mid March. So glad I did, now that the market is recovering.

@bobstovall5449 2 жыл бұрын

Excellent presentation, Chris. I only wish I'd seen this when you published it 18 months ago.

@prej1741 29 күн бұрын

Thank u 🙏

@gaithalbadarin6774 3 жыл бұрын

Thank you

@shanemiller5381 3 жыл бұрын

You’re always professional and thorough with your videos! Keep up the great work and I’m sure your portfolio is BANGIN!

@Ilyakurishko 2 жыл бұрын

Great video, as always you are spot on! What is the optimal moment to fix the profit?

@annabellegoh 4 жыл бұрын

Chris, good video. Just adjust the light in front that reflects on yr spectacles...

@projectfinance 4 жыл бұрын

I'm working on figuring it all out! thanks for watching.

@ComradeVlad777 9 ай бұрын

Just wanted to say thanks!

@projectfinance 9 ай бұрын

You're welcome! I just spent a ton of time creating an Options Trading for Beginners PDF (170+ pages now) that includes my best explanations/visuals explaining key options trading concepts and strategies. Check it out: www.dropbox.com/scl/fi/g7d402wnapqexq344ct73/options-trading-for-beginners-aug15-v1.pdf?rlkey=dort61xyaz1rubndbwbqmhd5i&dl=0 If you want updates to the PDF over the coming months/additional learning resources, consider dropping your email on the page here: geni.us/options-trading-pdf

@Maitreya888 4 жыл бұрын

Excellent. Great lessons

@projectfinance 4 жыл бұрын

Thanks! 😃

@jessiechimni6913 3 жыл бұрын

Hi Chris - is there a relationship between Delta and IV? I have noticed that my profit projection using delta, once the stock moves up, are much lower that the theoretical (price increase*delta) projection that i have been doing. Hence I assume IV has a lot to do with the gap. I would appreciate your thoughts

@eze4life251 4 жыл бұрын

Another great video Chris! Thanks man!

@projectfinance 4 жыл бұрын

You got it! Thank you!

@user-fb8bo3ys2f 3 жыл бұрын

AMAZING VIDEO.

@BeatsByLoFi 3 жыл бұрын

Can we get a study done on the optimal trade management strategy for LEAPS? Similar to what you did for the CSP puts on SPY. This could be a MAJOR help!

@timothyscott1641 3 жыл бұрын

Another great video. Thanks for your videos.

@mistletoe91 3 жыл бұрын

Subscribed. Great vid

@ho2673 3 жыл бұрын

Hey man. What about low strike prices ? I love doing that.

@bibarishs3120 3 жыл бұрын

Thank You

@bballgtr 3 жыл бұрын

Explaining is one thing - as in how to do it. More important though is WHY. What is the purpose of using LEAPS - when does it work well and when is it a bad choice. For example, I know how to initiate an Iron Condor (not saying I could even do it better than anyone but I can follow step by step). Why? That is always the big moment - "Oh, so that's why it works so well!" Thanks for your help and advice.

@SejalPatelDrSej 3 жыл бұрын

Loved this but wish you would of went deep into the mechanism by which the 600 percent gain was effected through the Greeks as the underlying increased

@ST-wx6vw 3 жыл бұрын

Great Video. One quick question: When you go for say LEAP Call option, do you buy ATM ?

@cdscds7968 3 жыл бұрын

Thanks for the vid

@freewaydeath 3 жыл бұрын

Very informative video 👍

@taniashivam 3 жыл бұрын

is vertical spread good for leap options? example please

@xtctrader1467 3 жыл бұрын

Over the last week, I've been allocating some of my capital into Deep In the Money Calls in NEM, GDX and AEM expiring Jan'23 with very little Time Value (Delta >95).

@neelreeves087 4 жыл бұрын

great video chris! It’s interesting to see how with LEAPS delta drives the change in the option price. The time period is too far out to prevent significant theta decay. and with something like SPY as an underlying, over a long period of time, IV should average out to be fairly low as the price generally grinds up, lowering the effect of Vega decay 🤔

@projectfinance 4 жыл бұрын

Thanks for watching/commenting!

@lockerbie7724 3 жыл бұрын

what is your opinion on a put leap for SPY and a Call leap for FAZ ?

@jasonramos8665 3 жыл бұрын

what about doing spreads on these leaps?

@ihatefrance69 3 жыл бұрын

Hey Chris, I’m 15 and I’m trying to learn as much about finance in general as I can but more specifically options trading and value investing. Do you have any tips or suggestions of what else I should learn before I start investing for myself?

@idrisb7515 2 жыл бұрын

Hi Chris, which strike to use, ATM, ITM or OTM?

@baptiste6436 3 жыл бұрын

what do you think of futures compared to leaps?

@jiaminzhu406 3 жыл бұрын

I buy the furthest leaps ITM calls and consider them as long term assets. Of course I also sell short term calls against it. Can you make a video about more detail in rolling the long call forward? For example, do I change the strike? Do I use the same delta? Do I always roll every year or every quarter when the new leaps comes out? Should I roll for debit or credit? More importantly, how do I compare and what standard should I use to make decision between different decisions in rolling leaps forward?

@migueldiazcabrera 2 жыл бұрын

Great videos 👏

@PeteBuchwald 2 жыл бұрын

Idea: if i'm very bullish on the longterm, buy a leap, while selling a long-term put. Use the put premium to lower cost of buying the call, and lower my break-even price. I'm sure I'm not the first person to consider this combination. lol Thx for your content.

@kpec3 2 жыл бұрын

I never sell puts because the market could move down and you get assigned. It's uncommon in American style contracts, but I have had it happen twice in the last several years. The spy is weird because it is so volatile. I would bet because of its volumes that it is actually more volatile than a lot of stocks. Of course you could buy the put and take the loss and hang on to the call in the hopes that things turn around. Then you are just straight long, and it's never easy to make a profit, especially now you need more to cover for the put. I just think there is a decent risk of early assignment on spiders. Well, gl!

@skorheim 3 жыл бұрын

Spot on!

@mattjaworski6904 4 жыл бұрын

what if the open interest is high, but volume is low....Still a safe play?

@breezefor5966 4 жыл бұрын

Chris you are the best, keep it up;)

@projectfinance 4 жыл бұрын

Thank you! Will do!

@davidgross2684 3 жыл бұрын

Watershed video the way you explained this. Thanks

@jackychen1523 3 жыл бұрын

How to choose the strike price for leap? Deep in the money or out of money strike price

@katypackins3338 3 жыл бұрын

Very good info. Would you recommend using the debit spread for LEAPS (or even for a shorter time trade), why/why not? thx.

@kpec3 2 жыл бұрын

No. The stock has to have a major upward move beyond the short call on top. You need to fill the gap between the two strikes to make a profit.

@squib3083 4 жыл бұрын

Great channel and content

@projectfinance 4 жыл бұрын

Thank you!

@KennethOngML 3 жыл бұрын

Just started trading options, your videos are very clear and informative ! Thank you!

@Miamibeachlifestyle 3 жыл бұрын

Sup Chris -- Sounds all good but lets say you have a long ITM 2+ year LEAP call but underlying is reporting earnings soon (and you dont want to sell due to taxes or whatever) -- how do you avoid IV crush-- IV affects only extrinsic value which is greater on leaps then shorter term options- Maybe sell a call -- and which strike (right above or above what the expected move would be?

@stevieb931 4 жыл бұрын

These are my type of options! Could you do a LEAPS strategy?

@projectfinance 4 жыл бұрын

I'll come up with something!

@stevieb931 4 жыл бұрын

@@projectfinance 🤜🤛 champion. Thank you!

@grim789 4 жыл бұрын

@@projectfinance Any update on this? Love your channel btw man!

@BadWeatherfreak 4 жыл бұрын

What you think about a walmart call for 125 to expire may 15th?

@sharidass1408 4 жыл бұрын

I really wish this video was posted around March ending to April 1 week time frame. Good video

@velwear 3 жыл бұрын

Hi, do you have a video on Roll Overs?

@ravivudu 3 жыл бұрын

Great Video! Got a quick question. Do you recommend vertical spreads on leaps in case you can't afford to buy calls for certain stocks like AMZN?

@katypackins3338 3 жыл бұрын

As always, thank you, thank you, thank you!

@CH1NOify 3 жыл бұрын

Good stuff and ty sir. ..What happen if I waited until the expiration date for a leap options to expire?

@DennisRay99 3 жыл бұрын

Depends on the underlying.

@MenendezRobert 3 жыл бұрын

Hey what is the maximum time you have held a leap call to make a decent profit? Thanks

@ronjohnson7699 2 жыл бұрын

What about buying a put for long term downside. Is that a strategy with leaps as well,

@andredennis2199 3 жыл бұрын

Central stopper

@friedpickles342 3 жыл бұрын

How would you apply this if you are selling calls or puts

@avinashcm 3 жыл бұрын

I m joining your new youtube channel! Thanks!

@projectfinance 3 жыл бұрын

Awesome! Thank you!

@chloechloe3080 Жыл бұрын

Hi, where can I learn more, I don’t understand if in a “range trading market” or up and down and up and down market, how does it affect the leaps options ? This is when u are correct 100% in the direction where the market is going, at this point, we don’t even know this is a slowly climbing up, or there is more pain to gain, but for sure a year or two from now things will be cheaper than it is today ( hopefully )

@opportunistbusinessmodelsl2093 3 жыл бұрын

Absolutely love this channel!!! Best on KZfaq hands down!! I have some leaps on Square, the latest one reads...as of 10\14\2020 SQ 20 JAN 2023 ITM Trade price 100.00 Bid size6 114.05 ASK size60 118.20 Delta: 91.54 Gamma0.0904 Theta-1.65015 Vega: 43.3587 Net liq.11,607.50 P\L Day -425.00 P\L Open 1,601.84 Ill give updates on how its doing as time goes on Thanks again for the great videos.

@mysticalrose1414 3 жыл бұрын

nice work

@klearr-1517 3 жыл бұрын

How is it going?

@abelflores4835 2 жыл бұрын

Trading Guru

@jolseywales 2 жыл бұрын

Some gurus (or teachers) say cash secured puts for LEAPS. Why long covered “calls” versus “puts”??? Confused

@imnokasparov 2 жыл бұрын

In your example, the leap you purchased was deep out of the money. You then hypothetically held it until it was at the money. That seems like a pretty unrealistic scenario - more like gambling. You lost 100% of your money if the market had gone down, stayed the same, or even went higher. You only made money if you were lucky enough to buy SPY at the bottom and it moved substantially higher.

@DK-ty5ue Жыл бұрын

good stuff. Don't let your leaps expire, roll them

@Deal-withit Жыл бұрын

Tell me why?

@ambidextrousTrades 3 жыл бұрын

Thanks for the video. How do I know if the IV for a leap contract is high or low? I want to avoid IV crushing after I buy a leap so how would I know not to overpay due to IV?

@UnknownChimera 3 жыл бұрын

Compare it to realised vol... for SPY you can also check the VIX chart to have an idea of how high or low is the IV compared to its past values

@kpec3 2 жыл бұрын

If you go long, it's pointless to buy IV. IV is equal on a call to the stock price minus the strike price. There's no benefit to buy an itm option, because all the IV can do is go to zero. The TV will definitely go to zero, but if the stock retraces, and your itm goes otm, how did the extra cost help you? It's a waste.

@JK-vb9ps 3 жыл бұрын

Chris, can I substitute my leap call option with a long synthetic call spread with a protective put? Ie 3 legged strategy: Buy a leap call option, sell a leap put option at the same strike & expiration, buy a put option at a lower strike but same expiration. The P/L chart is somewhat the same profile but results in a smaller net debit prem. What are your thoughts?

@DennisRay99 3 жыл бұрын

Interesting ideal

@sogsamson 3 жыл бұрын

That $4 Jan 22 300 call trading at $124 for a 3000% gain as of June 21

@korswe 3 жыл бұрын

Where can I buy leaps? Robinhood?

@mrshep8215 3 жыл бұрын

great video

@jebenamacka 4 жыл бұрын

Hey Chris I really love your chanel. I think you made mistake explaining IV on January 2020 calls for SPY it should be Jan 2022?!?!? It is around 15min's of video. Can you clarify that if it is not mistake then I'm lost lol.

@projectfinance 4 жыл бұрын

Yes! Jan 2022 is what I meant. Yikes!

@chinnms 4 жыл бұрын

How would this strategy work for LEAP option way ITM, say at the .80 Delta? How would one still make money off the LEAP? Thanks!

@mu27amaria 3 жыл бұрын

what about a LEAP bull call spread? How would you choose the short leg? Thanks

@Miamibeachlifestyle 3 жыл бұрын

The way I would do it I will check on the option Chain what is the expected move and try to get a strike around there . If you’re extremely certain it will hit or your budget allows then move the strike further OTM on the short option.

@SM-USA 2 жыл бұрын

Subscribed 🚀😘😘

@The-Humble-Trader Ай бұрын

When buying long term options, would you recommend buying in the money or out of the money options (especially DOTMs)?

@J3rianRivera 3 жыл бұрын

Subscribed.

@GaragemdoCaio Жыл бұрын

Hi, thx for the video. Quick question: Does IV matter for LEAPS?

@projectfinance Жыл бұрын

Thanks for watching! Technically, IV always matters. But what we observe when looking at LEAPS is that IV changes much smaller than short-term IV, meaning IV is much more stable for longer-term options. If you look at a long call LEAP from the bottom of 2020 to a few months later, you'll see the huge VIX/IV crash didn't matter for the long-term calls. Some people will say that longer-term options have higher IV sensitivity since they have higher vega, but the thing is the longer-term IVs don't move nearly as much as short-term IVs, so the larger vega is misleading on its own.

@braggfamily1123 3 жыл бұрын

So Thera is only subtracted from share price & not the call premium? What about delta?

@sedul2006 4 жыл бұрын

Thank you for this video. Question: since the 2-year LEAP has so much time to expiration, is it a correct understanding that you have more time for the underlying to move in your favor. In the example with the SPY 300C 2 years out, even though we are OTM 1 month from the bottom, the option still has value. Would it be hard to sell given that it is a 2-year LEAP with low volume and open interest? If you had bought a shorter DTE options say 3 months or 6-months, it will have a higher time decay, but generally, it will have a higher reward to risk ratio given that it probably would have been cheaper than the 2-year, is that correct?

@projectfinance 4 жыл бұрын

Generally speaking -- an option at the same strike and a shorter time frame will have a larger % increase given the same move. But by going to a shorter time frame, it becomes more of a gamble because you NEED to be right, and fast. And about selling the option, it wouldn't be hard, but you would have to likely sell lower than the mid-price (same with buying -- you'll usually buy higher than mid). But in SPY, the options are pretty active even that far out. There's a large enough of a market to make it happen. I wouldn't worry too much about getting in/out in liquid stocks, which is why I mentioned to only do this type of trade in popular products.

@yoursurgerysister 3 жыл бұрын

Great answer.

@kpec3 2 жыл бұрын

What is weird about TV is that there is always more on a more distant expiration, but it's not proportionate. A 2 year leap might have $6 if it's otm, but a 2 month contract might have $2 for the same otm strike. $6/24 months < $2/2 months. The time value is disproportionately front loaded, back months get cheaper because otm options demand the stock to hit a home run in the 9th. Very rare. But shorter term contracts are the same because in the last week the contract's TV takes a sudden nose dive. TV is not a linear progression where week 1 TV = any other week during the same contract. So if you are going long, you would do well to buy in the back months to save money and have the best chance to see that massive move that you will undoubtedly need.

@Larry-Hi 3 жыл бұрын

What strike price do I choose, something close to current stock price?

@tabbott429 3 жыл бұрын

due diligence answers that

@dejangavriloski3140 4 ай бұрын

I was looking to some of the stocks and they have open interest about 16k 28k for the particular price that I was interested in so I'm guessing that's pretty good strike price

@troybenbroke677 2 жыл бұрын

I enjoy your Videos .. much more now that i understand more lol .. at todays date 3/2/022 did you make that leap option on spy and hold till this yr ?

@Jaffy2011 3 жыл бұрын

Ty very much for the video. I bought a leap in a stock I would like to own. Is it best to keep through exp? I’m obviously very bullish on this stock

@xCoolzxX 3 жыл бұрын

OK, don't keep through expiration since it will get exercise and you will have to buy the stock at the price of your leaps, second, theta decay really ramp up in the last 3 month, so you should sell before that unless you expect a huge up turn during that time. Hope that helped.