Stock Options Trading: How to Trade LEAPS and Why They Matter
ฝัง
- เผยแพร่เมื่อ 14 พ.ค. 2024
- #OptionsTrading #LEAPS #TeslaLeaps #ILMN #LEAPSTrading #OptionStrategies
👋JOIN THE COMMUNITY: / investanswers
DISCLAIMER: InvestAnswers does not provide financial, investment, tax, or legal advice. None of the content on the InvestAnswers channels is financial, investment, tax, or legal advice and should not be taken as such; the content is intended only for educational and entertainment purposes. InvestAnswers (James) shares some of his trades as learning examples but they are only relevant to his specific portfolio allocation, risk tolerance & financial expertise, may not constitute a comprehensive or complete discussion of such topics, and should not be emulated. The content of this video is solely the opinion(s) of the speaker who is not a licensed financial advisor or registered investment advisor. Trading equities or cryptocurrencies poses considerable risk of loss. Kindly use your judgment and do your own research at all times. You are solely responsible for your own financial, investing, and trading decisions.
TIMESTAMPS:
0:00 Introduction
0:30 LEAPS
0:40 Disclaimer and 1.2 Million Views
1:00 LEAPS Advantages Time Stability Leverage Great returns (when you back a winner!)
1:35 LEAPS Defined LEAPS are publicly traded options contracts with expiration dates more 1 year and out, up to 3 years from issue Identical to other options, except with longer times until expiration. Typically traded on stable well traded stocks, ETFs and indexes
2:35 LEAPS Defined
3:00 Short Term Calls vs Leaps Think of rent per month - ie time value. Short-term calls are like renting 5-star hotel rooms at $1000 a night. LEAPS are like buying a house and paying 2.5% mtg interest ie borrow $500K
4:15 LEAP Math My $TSLA LEAP Buy - story of the X! 9,000% return
7:00 Terminology:ATM, ITM, OTM A call option is in the money (ITM) if the market price is above the strike price. A put option is in the money if the market price is below the strike price. An option can also be out of the money (OTM) or at the money (ATM).
8:00 The Greeks Sensitivity of option’s price to changes in the value of underlying security - Delta Rate of time decay of an option - Theta Rate of change of Delta relative to change of price of underlying security - Gamma Option’s sensitivity volatility -ie Vega Vix Sensitive the price of the option is relative to interest rates - Rho
8:24 ILMN Play - bought the $300 LEAPS for $90. BEP $390 Now DELTA is $87 per $ move in price Buy in the money leaps DELTA Secret on Patreon Theta is the loss per day in $ of Time Decay
9:35 LEAPS Rules and What to Watch For
10:00 When to Buy? If you are thinking about buying LEAPS, you may want to do so when implied volatility is relatively low - Vega. Sell when Vega is high Note Rho (an options' sensitivity to a change in interest rates) is no longer important!
10:40 Long Term Outlook Takeaways: Needs to be bullish Find the bottoms Identify the range
11:30 Make a Thesis eg $1T MktCap
11:50 Risk Stock options are always RISKY if you do not know what you are doing. You can structure your investment with LEAPS if you're bullish on a particular stock. A rise of 50% could translate into a 300% gain, but this strategy comes with risks and the odds are stacked against you - you against the machine. Remember the rules I shared!
12:30 Watch Open Interest Need volume to trade.
13:00 Limit Orders Only - Sometimes LEAPS can have big spread between bid and ask.
14:00 Taxes When LEAPs are sold at a profit, the gain is taxable.
15:00 How I Operate
16:00 ILMN Simple Math Remember the Delta is key Time decay is gradual
17:00 Time Decay
18:00 Patreon.com / InvestAnswers see how I trade - วิทยาศาสตร์และเทคโนโลยี
Brilliant video,well explained,you get heaps of views because your vids are quality.very nice.
I appreciate that!
The ability to keep it simple.
@@InvestAnswers Thank you James for teaching us these tools.
@@InvestAnswers going back and looking at these videos again two years later !
It’s nice coming back and watching some of the older videos! I’m glad James starting making videos daily, this man has changed my life.. I’m blessed to be part of the IA patreon. The trade alerts and market updates are priceless..
I am just watching it today. Proof James is a perennial . Quality never fades.
While trying to build passive income and prepare for retirement, It’s important to choose stocks that are expected to hold up in inflationary environments. To combat the negative effect of inflation, it’s a good idea to diversify your portfolio across different asset classes, such as stocks, bonds, and real estate, since this can help protect your portfolio against inflation. I have seen people making up to $800k in a month during high-inflation
One strategy is to invest in assets that perform well during inflation. Another strategy is to focus on companies that have the ability to pass on price increases to their customers. It's also important to maintain a diversified portfolio. It may be a good idea to speak with a broker who can help you develop a customized investment strategy based on your individual goals and risk tolerance
@@BrunoLuke I used to manage my stock portfolio by myself, all that time I did not make any significant returns (but also did not suffer losses). Then out of nowhere 2008 happened, and I lost 50% of my savings in a very short period. That prompted me to hire an FA, Since then I have been learning a lot about the stock market and I have made up to $500k in returns
@@MarcusFred-wn3iv I've been thinking of going this route of using an advisor. Could you suggest yours?
@@BrunoLuke I personally work with *KRISTIN GAIL CUNNINGHAM* She covers things like investing, insurance, making sure retirement is well funded, going over tax benefits, and ways to have a volatility buffer for investment risk. many things like that. Just take a look at her full name on the internet. She is well known so it shouldn't be hard to find her
@@MarcusFred-wn3iv She appears to be well-educated and well-read. I ran a Google search on her name and came across her website; thank you for sharing.
The definition of LEAP is what you're doing with the TH-cam Algorythm :-) Crushing it on the SUBS!!! Stoked for you.
Thanks for that!
Omg. I had tried to learn option from other channels and I was so confused until I learned from this one. Glad that someone asked you about the option trading book during your live today and you referred to these series. Thank you!
just wow!! thank you for fully explaining it, in very great detail. im bilingual, the way you explain it made it so understandable. thank you as always james
You are such a great investor and teacher lol. Thank you.
I appreciate that!
Love your chill style on all the topics you cover... Thanks for that in a sea of over-hyped content
I appreciate that!
Finally learned what LEAPS mean. Love it.
I subbed to the channel last week, and the amount of information is incredible. Trying to be a SPONGE for all this POWERFUL wisdom you are putting out into the world. Thank you for being the teacher that the youth of today need. I wish I learned any of this stuff in school.
Welcome aboard!
This is the first video that I don't watch at 2X speed on youtube in 2 years.
Very interesting. Keep up the good work.
Welcome aboard! Thank you and I do that also. But there is a lot of meat in this one.
Totally same... favorite thing about TH-cam is the ability to speed up. With IA I leave it normal speed. GREAT MATERIAL.
you are so generous to provide such good information and teaching here for free. I am so glad I found your channel
Glad you enjoy it!
I’m a bit confused on selling leaps options in relation to time decay. I understand if the stock goes sideways time decay kills the value. But what if the stock continues going up, does time aid you then? I was able to score leaps options on NIO & NVTA at their recent bottoms. With the rally this week the options have almost doubled in just a week. Does it make sense to sell now even though I’m bullish long term and expect the stock to be well past the prices I was able to grab it at? I’m not expecting a concrete answer, more so trying to understand the pros & cons of continuing to hold. Thanks for sharing your wisdom, I’ve been learning a lot
You are awesome James, I only wish youtube recommended your feed to me sooner !!
I love your material on MICROSTRATEGY
Glad I got served up this oldie but a goodie
taking notes!!
Thanks for teaching us appreciate it
Wow! What great videos you have, and I don't usually comment on youtube videos... I will purchase your Patreon subscription without a doubt (even if I don't use it) just to support this channel! Great work man keep the videos coming, this information is a blessing to new traders.
Many thanks John, VERY APPRECIATED!
Awesome James! Just what I'm looking for!
@12:52 you talk about options that are well traded, at what point would you consider them well traded? In the triple digits?
Great video! Can you explain in depth why delta x price = # of shares controlled? I tried to do the math on my own positions and this didn't really make sense to me. How does the price the option affect how many shares you can control? The most you can exercise from 1 contract is 100 shares right?
I was just looking at BRK.B and reviewing the results on1/23 OTM Leaps with the highest OI purchased during the 10/20 low. The stock is up @ $100. They OTM leaps which are not ITM seem profitable. Could you provide more insight regarding why not to purchase OTM leaps or leaps on BRK.B?
What happens in the situation where the underlying stock goes above the strike and we are the leaps sellers? But after couple of month it goes bellow the strike. Do we have a risk of the leaps to be executed or would they (buyers) usually wait till the expiration. Thank you
Love your teaching style, you are an EXCELLENT TEACHER
Glad you think so!
Absolutely a brilliant way of presenting things. Well explained, high quality of information. Thank you so much for that. I would tend your class anytime, if your were teaching.
For guidance and strategies to make huge profit plan..
Good video… Another thing I will do when I buy leaps is sell shorter dated options against them to lower my cost basis… Thanks and if my leap options are in the money I’ll scalp Gamma by shoring 😊shares of the stock. For example, if I have 5 call leaps in the money im essentially controlling 500 shares, if the stock makes a move higher maybe I’ll short 100 shares, now I control 400 shares Normally over time and I will cover and scalp some money without ever touching my options… and if the stock makes that move and never dips back down for me to cover then I’m still hypothetically long 400 shares
Good job on the video! I’ve been trading options for years and still learned something from it.
My one question is. Once you have identified your thesis for a leap trade, how do you know if the big stock move isn’t already priced into your leap price already? Does the delta decrease if many have already bought the same leaps before you?
@@cryptokirbytrading1722 can you provide the number or iMessage account I should text to?
I think it might be helpful to discuss selling shorter-term calls each month against your LEAPS as a way to reduce your cost basis/risk. Relatedly, people who are new to options may be confused by the short ILMN 600 call you showed in your screenshot since I don't think you mentioned it. Personally, I'd be curious to know why you sold another a LEAP against your long position instead of selling monthly calls along the way. After all, if it's smarter to buy LEAPS than to buy monthlies, then surely it follows that the opposite must be true when selling.
Such quality and free!
Again, 3rd time I watch this video! Thanks a lot Giacomo!
Hi James, I’m a relatively successful engineer but the money in engineering doesn’t come close to trading. I’m thinking about a career switch, I also like the idea of working when and where I want. Any advice you can give on how long it might take to learn everything I need?
We enjoy your passion for investing as well as your wellingness to share with us
Thanks
Thanks for watching
I subscribed after hearing your first sentence, great job.
Awesome, thank you!
Thank you very much. I wish you were my investor. Straight to the point. I am telling my friends to subscribe to your chanell. Best wishes, stay strong and healthy!
Many thanks, Sead
At your intro, are you saying “Welcome in” in English or the word welcome in another language which often has additional letters in other languages?
What’s your opinion on buying LEAPS two years or longer, then selling short term covered calls after the first year to generate cash flow along the way? Porter
Do you exercise to convert your option premium into stock cost basis and thereby avoid cap gains ?
Your videos are very interesting!👍🏻😃
Would you use Leaps in an IRA or you would use shorter term options since there are no tax issues on the holding period?
Depends on your account
Thanks very much! Good quality. No fuss!
You're welcome!
Thank you so much !!!
Rewatching this video here in August 2023
Great stuff as always.
Thanks again!
Great video. Would love to hear your thoughts on ZI and DSP respective to options. I am in the space and both of these merit a bullish outlook.
For guidance and strategies to make huge profit plan.
Hi I tried to join your patreon but it says sold out. Is that the only way I can access your exclusive information?
I too love LEAPS …. Not LEAP, this is a well done educational video that explains LEAPS without over complication of a very complicated topic, Thank you!
What is that crash list your looking at? Rotation to oil is a thought.
I have a question. If I believe SPY to be at 240 in a year or so, what strike price do I need to pick? I am clueless on options let alone LEAPS. I'm thinking March 15 2024 240 strike
Hi, Can you please tell me the volumes of LEAPS contracts ? Are they liquid , any website where i can check . Thank You
Really outstanding content. Thank you!
You're very welcome!
A lot of people seem to advise against Trading leap option 🤔 any ideas why
james!!!! how can we play this leaps strategy for BABA!!!
You made me interested in the Patreon Group!
Hope to see you there!
I wonder if it would be possible for you to give us a few stocks that you like and strike prices to look for in this down turn.
What do you think about Ford and Disney LEAPS for Jan 2024 expiry?
Question; Don’t the Greeks change constantly? If you enter a trade at $.88 delta, isn’t that subject to change, especially with volatility??
That acronym is quite the leap.
What was the strike price? 😳
As of Dec 5. 2021, this trade is down $2,800(-31%). How do you fix it?
You're the best!
Many thanks!
Am I late to the party I can't seem to join the patreon? Does anyone else have that problem?
Yeah damn, the channel Is pumping now.
Boom!
Would you talk about your thoughts on GLXY on this channel?
yes coming
@@InvestAnswers the opening this morning might be your entry point for GLXY.
Cheers Phil
@@InvestAnswers it's gonna pop this morning. I hope you got in on the dip. This is the perfect underdog stock. Highly overlooked. Good work by the way.
What do you think of the ETH price dropping to -1500 right now?
Learning - thanks
Keep watching and learning, mate!
So a LEAPS is an option...that you dont have to execute if you are out of the money. Say you buy a LEAPS and the stock goes down, the max you lose is the value of the LEAPS option. Your example of $45x100 is your max loss...is that correct?
You sir are 100% correct. You can never lose more than what you paid for the option. That is why many people prefer to buy options over futures. Also, you can lose a huge amount of money if you sell options, so don't do that until you know what you are doing.
can we see some videos of you trading on you computer i.e websites you use etc I think it would be much easier to digest. for me anyway im fairly smart and these leaps go over my head mostly.
Hi Pete, I do this sort of stuff on Patreon.com/investanswers
Getting smarter video by video. Thanks awfully. 🙏
You’re welcome 😊
More options videos please
Love your curriculum -- any books you'd advise for more information.
Coming soon!
OTM LEAPs for $TSLA would have netted 1000x. I bought one OTM $530 call when Tesla was $300 pre split and sold wayyyy too early for fewX return. Had I kept it, would’ve reached 1000x return.
yes but remember risk reward, what TESLA did was unprecedented in quite some time. We can compare trading results if you like :D
@@InvestAnswers Most of my successful trades have been either multi year share holding or investing in disruptive innovation during the last 8 year bull market. You're surely more skilled 😄
One thing I'd like to know is your anti-portfolio. Biggest misses! Mine is HUGE 😂🤑. Had many ideas I didn't pull the trigger on, or if I'd held would've been life changing money, or jobs that equity would've been big. Am learning to be better about it emotionally focusing on forward, but how do you deal with selling too early or not diving fully into a position psychologically? Close misses in general?
YESSS!!!
So GLXY would be a great stock to do a LEAPS of 3 years, no?
no LEAPS available on $GLXY
No dislikes =quality content :)
Thanks Brice
Thanks for a great explanation. If I had high conviction on a stock, wouldnt it just make more sense to buy ITM (or deep ITM) leaps rather than owning the stock itself??
You are exactly right. Time value (theta) is relatively low on DITM LEAPS whilst delta is still high and the option can be much more profitable than owning the stock. LEAPS supercharge your returns, but if the stock dips below your strike at expiration you lose the entire investment even though the stock still has some value.
@@odomn Thanks for clarifying :)
@@odomn so the max you can potentially lose is your initial investment (cost of contract)? I'm trying to wrap my head around all this new info lol
@@davina0611 Options are complicated, but you are right about the maximum loss. The SPY index etf is at 391.77 right now. I can buy a 392 call option that expires in 1 month for $2,387. (23.87x100) If SPY goes above 416 then I make money (392 plus 23.87). If it goes below 392 then I lose the entire $2387. If it closes somewhere in between then I will lose some but not all my investment. But you can never lose more than you paid for the contract. Which can still be a lot of money. And still hurts. But remember, you don't have to hold the contract until expiration. If SPY goes up sometime during the month your option will go up too, and you can sell it and make money even if it doesn't reach 416. But it is a race against time and volatility, as your option is worth less every day and it is also worth less as volatility goes down, which usually happens if SPY goes up.
Forgive my ignorance but I assume you can lose multiples of your investment as well as gain multiples? I look forward to your show every day 👍
@@cryptokirbytrading1722 spammer
👍
Are you bullish on btc? Or bearish?
so bullish
Thanks, new subscriber here and been watching a lot of your videos and you said tonight that you were turning bearish, so I wasn’t sure if that applied to crypto also.
so you dont use TA?
big time I do
Anyone who talks leaps gets my subscription
For guidance and strategies to make huge profit plan.
It's easy to do it in bull market.
Love your videos, but this one went way over my head.
Why is that? I worked hard to make this one digestible. I want to improve and simplify where possible.
@@InvestAnswers No, it’s not you. Your content is great. I love your videos. I guess it’s that feeling you get when you learn something new and initially it all just feels daunting.
I'm there with you. Rewatch it and perhaps look up specific concepts you don't understand. Learn the terminology and gradually you should start piecing it all together :)
"Rho is no longer important" ahhh, you sure about that? :p
The 2021 crash, apple 3t market cap.... are you a time traveller!
There seems to be a spammer on comments I have 3 messages, from a comment I made. Your picture but doesn’t read like you sound
Look out for those savages, they're everywhere! Report them if you see them.
@@InvestAnswers to who
@@lvpatfleming7465 you can flag them on TH-cam 👍
Is it good to always be hedge all the time every day to some degree I am currently not but at the start of 2020 but I only had about $10,000 invested and one of my portfolios that was about $3000 I had a bull and bear pie(M1 finance) basically I was 95 percent long and has some TECL or whatever the tech 3x inverse etf if and sqqq and TVIX back before that got stopped and I would just throw 20$ ever week or so sometimes more and I also had a lot more 3x bull ETFs and long stock and I wasn’t expecting a crash really I just thought in my wonky math it would come in handy some day esp if the ratio was righ and sure enough that portfolio recovered way faster than the rest of my portfolio well they where about the same but I did a lot of trading in the other but I had a much better cost basis and those inverse ETFs some 20x and so it really helped so I think I’m gonna start doing that again even I’m sure as soon as I will the market will start going up again and that’s fine what’s your thought James is it right my name is travis thanks as always
What’s your favorite options strategy, in which is your go-to strategy that gives consistently profitable results? Apart from LEAPS what are you thought on selling put options?
I wish I could ask how the one downvoter feels, can´t imagine how bad you must feel to not like a video like this. Cheer up buddy!
Read my leaps 😬
nope...way too complicated
To be honest you have given some very useful info. Sub'ng u r8 awy.
Awesome, thank you!