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| How Much Should You Pay for a LEAPS Option? |
| Karim Rahemtulla, Head Fundamental Tactician, Monument Traders Alliance |
 | Here's everything you need to know about LEAPS. |
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See How the Win-Both-Ways Trade Could Make You Up to 350% Overnight (Like It Did Rick!) Rick Carrier, December 8, 2020, 9:48:26 a.m.: "Got into Stitch Fix last night on a Win Both Ways play, in at $4.97 sold out first thing at $17.48 for a 350% win! Thanks for the help!"
See how the Win-Both-Ways Trade can help you moving forward by clicking here. |
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|  | WMT reported earnings per share of $1.69, which beat the expectation of $1.21. It might be time to move into June calls. Tracking... | | Live Nation (NYSE: LYV) continues to print: two intraday winners this week... and more to come! | | Karim called it. On Monday, he warned members Bitcoin could test the $30Ks looking at longer-term charts. If you missed the warning, it's time to join us here! |
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How much should I pay for a LEAPS option?
I often get asked this one question.
And the answer is pretty simple, but first let's talk about what LEAPS are.
A LEAPS option is a Long-Term Equity Anticipation Security. Simply put, it's an option that can expire in a year, two years or three years.
Why should you use a LEAPS option?
Well, it's a proxy for the underlying stock that allows you to participate in the stock's movement for a fraction of the price - over a longer period of time.
Which stocks should you buy LEAPS on?
I buy LEAPS only on non-dividend-paying stocks that I expect to appreciate. And I can use the same thinking for the downside. If I think the price of a stock is going lower, I will buy a LEAPS put option.
Now let's talk about the pricing.
First off, you want to buy LEAPS with strike prices as close to the money as possible, meaning that if a stock is trading at $30, you want the strike price to be as close to $30 as possible.
Now, that option can be pretty pricey depending on the stock. So my formula for one-year LEAPS is to pay around 10% of the strike price.
For example, if the $30 strike of XYZ is trading for $3 or less, then I would buy that strike. If it's more than $3, I would look to the next strike. If that strike is too far from the current price or not within a realistic target, I would either skip that trade or use a spread.
If I think the shares will move 20% in a year, from $30 to $36, the $3 I pay for the $30 LEAPS would go up 100%. The best parts of this trade are that I have a full year and my maximum loss is what I paid for the LEAPS, or 10% of the underlying price.
Now let's say I wanted to go out two years. I would then pay 15% to 20% of the strike. Of course, the two-year target should also be substantially higher than the one-year target.
With LEAPS, you can close out the position at any time just like with regular options. I use LEAPS in The War Room all the time. In fact, our biggest War Room winner came on a LEAPS play.
Action Plan: If you want real-time LEAPS recommendations, click here to follow me in The War Room!
Yours in smart speculation, |
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Karim Rahemtulla, Head Fundamental Tactician
Monument Traders Alliance |
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| Recent War Room Winners |
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| CVX | | 5/20/2021 | | 3.77% | | LYV | | 5/20/2021 | | 17.10% | | AFRM | | 5/19/2021 | | 14.29% | | TJX | | 5/19/2021 | | 7.46% | | SLX | | 5/18/2021 | | 41.40% | | Biggest War Room Winners | | BG | | 5/26/2020 | | 320.00% | | DIS | | 10/13/2020 | | 198.81% | | FDX | | 9/18/2019 | | 188.49% | | NUGT | | 8/17/2020 | | 179.31% | | FSLR | | 10/28/2020 | | 160.15% | | Fastest War Room Winners | | LMND | | (4 minutes)
12/7/2020 | | 36.67% | | ROKU | | (4 minutes)
9/10/2019 | | 53.62% | | MCD | | (5 minutes)
1/8/2020 | | 24.39% | | OKTA | | (5 minutes)
1/6/2020 | | 27.50% | | RGR | | (8 minutes)
1/6/2021 | | 73.33% | | WMT | | (Fastest double)
1 hour, 20 minutes 7/7/2020 | | 121.12% |
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| WAR Room Testimonials |
| | |  | David B. May 20, 2021, 12:12 p.m.
I opened LYV at $6.25 and closed for $8.50. LYV June 18 $82.50 calls, nice 36% gain! Thanks Bryan! | | | |
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| | | | George S. May 20, 2021, 2:57 p.m.
CVX Jun 18 $105 call in at $2.05 at 9:58 AM, Out at $2.47 for gain of 20.48% Not bad for 5 hours. Thanks George L! | | | |
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Went to Sleep... Woke Up to Big Overnight Wins Real people made one simple type of play...
Went to sleep...
And woke up to overnight wins as high as 108% (UPS)... 133% (Kellogg's)... 178% (Yum! Brands)... 150% (Urban Outfitters)... and even 188% on FedEx!
See the Real Trades Real People Used to Make REAL Overnight Wins >> Click Here |
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