Option trading LEAP options

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OrthoSurg
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Option trading LEAP options

Post by OrthoSurg »

I would like to know if some investors here have ever traded LEAP options for SPY ETFs to secure a reasonable price for these ETFs in 2-3 years down the road. Has it been tried successfully by anyone?
Angst
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Re: Option trading LEAP options

Post by Angst »

OrthoSurg wrote: Sun Sep 19, 2021 8:55 pm I would like to know if some investors here have ever traded LEAP options for SPY ETFs to secure a reasonable price for these ETFs in 2-3 years down the road. Has it been tried successfully by anyone?
Hey, welcome to the forum. Yes, people here have used LEAPs and you can find discussions about it by using the forum search tool - just enter LEAPs - at the upper right hand corner of this screen. I've never seriously considered the strategy, but others have.
secondopinion
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Re: Option trading LEAP options

Post by secondopinion »

I have not tried it but I have considered it. If it were not for the size of contract to exercise this (1 SPY LEAP requires over $40,000 of funds), I would probably try it in my IRA to preempt funding my IRA. I wish one can get contracts that are much smaller than this.
bugleheadd
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Re: Option trading LEAP options

Post by bugleheadd »

i bought a SPY 530 2024 call on the dip yesterday

already up 10% in a day
bugleheadd
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Re: Option trading LEAP options

Post by bugleheadd »

secondopinion wrote: Tue Sep 21, 2021 2:01 pm I have not tried it but I have considered it. If it were not for the size of contract to exercise this (1 SPY LEAP requires over $40,000 of funds), I would probably try it in my IRA to preempt funding my IRA. I wish one can get contracts that are much smaller than this.
you dont need over $40,000 funds to buy a leap. i bought mine for $1300
secondopinion
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Re: Option trading LEAP options

Post by secondopinion »

bugleheadd wrote: Tue Sep 21, 2021 2:09 pm
secondopinion wrote: Tue Sep 21, 2021 2:01 pm I have not tried it but I have considered it. If it were not for the size of contract to exercise this (1 SPY LEAP requires over $40,000 of funds), I would probably try it in my IRA to preempt funding my IRA. I wish one can get contracts that are much smaller than this.
you dont need over $40,000 funds to buy a leap. i bought mine for $1300
My given number is to exercise the LEAP, not to buy it (I know one can buy it for far less than $40k). But unless one has a good option rolling plan, it will take 6-7 years to have enough money to exercise such a contract (and such LEAPs of that timeframe do not exist yet).

Since it was asked how to secure the price, I try to realistically state the situation that IRAs have a hard time funding such an exercise. You only end up with leverage from an option that you cannot exercise.
Last edited by secondopinion on Wed Oct 13, 2021 4:41 pm, edited 1 time in total.
bugleheadd
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Re: Option trading LEAP options

Post by bugleheadd »

secondopinion wrote: Tue Sep 21, 2021 2:24 pm
bugleheadd wrote: Tue Sep 21, 2021 2:09 pm
secondopinion wrote: Tue Sep 21, 2021 2:01 pm I have not tried it but I have considered it. If it were not for the size of contract to exercise this (1 SPY LEAP requires over $40,000 of funds), I would probably try it in my IRA to preempt funding my IRA. I wish one can get contracts that are much smaller than this.
you dont need over $40,000 funds to buy a leap. i bought mine for $1300
My given number is to exercise the LEAP, not to buy it (I know one can buy it for far less than $40k). But unless one has a good option rolling plan, it will take 6-7 years to have enough money to exercise such a contract (and such LEAPs of that timeframe do not exist yet).
how does one excercise right away?,excuse my ignorance. my plan was to let my call appreciate a lot (lets say i set a limit to sell when theprice of option hits 13,000 before 2024), then sell the option and buy index funds with the gains.
secondopinion
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Re: Option trading LEAP options

Post by secondopinion »

bugleheadd wrote: Tue Sep 21, 2021 2:28 pm
secondopinion wrote: Tue Sep 21, 2021 2:24 pm
bugleheadd wrote: Tue Sep 21, 2021 2:09 pm
secondopinion wrote: Tue Sep 21, 2021 2:01 pm I have not tried it but I have considered it. If it were not for the size of contract to exercise this (1 SPY LEAP requires over $40,000 of funds), I would probably try it in my IRA to preempt funding my IRA. I wish one can get contracts that are much smaller than this.
you dont need over $40,000 funds to buy a leap. i bought mine for $1300
My given number is to exercise the LEAP, not to buy it (I know one can buy it for far less than $40k). But unless one has a good option rolling plan, it will take 6-7 years to have enough money to exercise such a contract (and such LEAPs of that timeframe do not exist yet).
how does one excercise right away?,excuse my ignorance. my plan was to let my call appreciate a lot (lets say i set a limit to sell when theprice of option hits 13,000 before 2024), then sell the option and buy index funds with the gains.
But the question asked about securing the price. If one is just leveraging to leverage in this way, that only adds to the portfolio's total risk (which may or may not help you with returns). If the funds are eventually accessible as to exercise it, the total portfolio risk is lower even if the initial leverage is present because a call option with cash-like investments is lower risk than holding the stock directly.
Last edited by secondopinion on Tue Sep 21, 2021 2:34 pm, edited 1 time in total.
dukeblue219
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Re: Option trading LEAP options

Post by dukeblue219 »

My #1 unofficial rule of options is that if you have to ask, you shouldn't buy or sell options yet.

You're going against organizations with far more resources than you in a 1-on-1 bet. Make sure you know what you're doing and what can happen in every possible scenario.
secondopinion
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Re: Option trading LEAP options

Post by secondopinion »

dukeblue219 wrote: Tue Sep 21, 2021 2:34 pm My #1 unofficial rule of options is that if you have to ask, you shouldn't buy or sell options yet.

You're going against organizations with far more resources than you in a 1-on-1 bet. Make sure you know what you're doing and what can happen in every possible scenario.
To the first statement, it is very much correct.

To the second, most of the trading occurs between the "organizations with far more resources than you"; they are fighting against/hedging with each other (depending on the nature of the fund and use of options). It is not gambling; there are very good reasons to buy or sell options. The root question is whether one needs to use options for their case.

The LEAP call, in theory, acts as a hedge to hold stock while funds are attempted to be surfaced (but are currently not present for a while or possibly not at all). Price goes up; the stock was bought cheaper than it is when the funds actually were available. Price goes down; the stock can be bought cheaper. Cannot surface the funds; you are not going to be subject to margin call risk.
bling
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Re: Option trading LEAP options

Post by bling »

very deep in the money LEAP options are a great way to get leverage at competitive rates.
Topic Author
OrthoSurg
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Re: Option trading LEAP options

Post by OrthoSurg »

dukeblue219 wrote: Tue Sep 21, 2021 2:34 pm My #1 unofficial rule of options is that if you have to ask, you shouldn't buy or sell options yet.

You're going against organizations with far more resources than you in a 1-on-1 bet. Make sure you know what you're doing and what can happen in every possible scenario.
I’m already selling options, selling calls and puts because they are overprice compared to historic volatility. I mainly do Iron Condors and have been making steady recurrent income without risk by buying the 19 strike call if I sell the 20 strike put.

However, I have never bought LEAP options for long term. I am mainly a buy n hold investor in my core shares however I use the margin for high probikity, small, recurrent, safe trade when implied volatility is high and options avec overpriced.

Just wanted the insight of the long LEAP buyers
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LTCM
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Re: Option trading LEAP options

Post by LTCM »

OrthoSurg wrote: Wed Sep 22, 2021 1:13 pm making steady recurrent income without risk
Nice!
60% VUG - 20% VEA - 20% EDV
smby
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Re: Option trading LEAP options

Post by smby »

I have been doing deep in the money SPY Leaps in mostly IRA accounts and some taxable accounts. It is a great way to leverage. Made at least $1M+ over and above normal SPY returns due to doings LEAPS....downside is high volatility
Topic Author
OrthoSurg
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Re: Option trading LEAP options

Post by OrthoSurg »

smby wrote: Wed Sep 22, 2021 6:44 pm I have been doing deep in the money SPY Leaps in mostly IRA accounts and some taxable accounts. It is a great way to leverage. Made at least $1M+ over and above normal SPY returns due to doings LEAPS....downside is high volatility
Do you take 3 years out of the money contracts? How do you decide your strike price?

I mainly do Iron condors and selling puts and calls for a 70% winning recurrent probability as option alpha suggests. However haven’t tried LEAPs yet
Topic Author
OrthoSurg
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Re: Option trading LEAP options

Post by OrthoSurg »

Thanks for the answers everyone
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