I have been trading for about two years but mostly focus on regular options. I keep hearing about LEAPS and would like to understand them better.
I think they are long-term options, with expiration over a year?
It would be helpful to hear from someone who uses them. Are they suitable for beginners or more risky?
Bought my first LEAPS call on Apple two years ago while learning the ropes. Dropped $800 on a contract that expired worthless - picked a terrible strike price.
That loss taught me LEAPS aren’t magically safer just because they’ve got more time. You still need to nail direction and timing.
These days I only buy LEAPS when I’m genuinely bullish on a company’s long-term outlook.
Time decay impacts LEAPS differently with their longer durations. The premium adjusts with the stock price rather than facing daily theta erosion.
However, it’s important to note that LEAPS can still incur losses even if your directional prediction is accurate. If the stock moves too slowly, the gains might not meet expectations.
They’re generally a better option for beginners compared to weeklies, as you have more time to be correct.
Expiration dates range from 9 months to 3 years. Premiums are higher, but theta decay is slower. Useful for directional plays that require more time.
LEAPS are long-term options that expire 1-3 years out. You get much more time for your predictions to play out compared to regular options. Time decay affects you less, allowing you to hold positions without as much stress.
I usually pick up LEAPS when I’m feeling bullish on a stock long-term and want leverage instead of just buying shares. They tend to be less risky than short-term options because you have that extra time, but they come with a bigger upfront cost.
They work well if you focus on longer-term trends instead of chasing quick profits.
LEAPS have less time decay, giving you more room to hold positions.