Trade Findings and Adjustments 03-23-2021
Leap Long Calls
Long Calls = Buy to Open = Right to buy the stock at a certain price (strike price) for a certain period of time
The Idea = Makes money when the stock trades/moves bullish
IT is a stock replacement strategy
LEAPS are a type of options contract with expiration dates longer than one year. The main benefits of a LEAPS option are:
- The ability to use less capital when compared to owning the actual stock.
- You can use a longer time frame allowing you to not worry about the short-term volatility of the trade.
- Hedge risk in a trade over a longer time frame.
AAPL currently trading @ $122.45 which every penny is at risk
IF you use the leap long call for $21 cost basis every penny is also at risk
Would you rather lose $122 or $21 ANSWER 21
21/122.45 = 17.14% of the value of the stock is at risk
You’ve hedged 82.86% of the risk of owning stock