LEAPS Options SUCK - Why I stopped trading LEAPS

LEAPS options trading strategy SUCKS. I stopped trading LEAPS this year for these 3 reasons...

Time stamps
0:00 Intro
0:25 Expensive
4:45 Buying Power
5:44 Liquidity

⚠️ DISCLAIMER ⚠️

I am not a financial advisor. This video is for entertainment and educational purposes only. You (and only you) are responsible for the financial decisions that you make.

[themichaelw]

What you're describing isn't LEAPS. Day trading is mutually exclusive with LEAPS. That's why they're called *LONG-TERM* Equity Anticipation Securities. It sounds like you were just swing trading far-out ITM calls, which is obviously a horrible idea. You're _supposed_ to buy and hold for at least a year, typically rolling out once you are into long-term capital gains territory.

[aggerleejones]

Some things I had to learn the hard way with LEAPS. 1) buy them in or at the money. LEAPS expose you to Vega risk so you want them in the money with the higher delta. 2) correct about liquidity, so you have to buy the largest open interest, otherwise there is no market and the market maker will screw you bad and 3) sell puts against your long put position. It's also why you want to buy the in the money otherwise you expose yourself to more risk.

[hipchecker]

Sure, the stock market can't be predicted. But isn't that why you trade options in the first place?

[race-abolitionist]

LEAPS options don’t suck at all.
As of the time of this comment, the current bid on that SPY $320
20 Dec’24 Puts option is 78 dollars. Considering the entry price of 30 dollars, that’s not bad. Would’ve been much better if you didn’t bet against the S&P 500.

[mr.mysterious]

I think it depends on the psychology of what you're trying to do. I think an account should consist of long term and income investing. For long term, buy and hold great companies. For income, buy leaps and sell weekly call options.

If that spy leap you held was a call, it would have been great for weekly option selling, hell you could have even sold 3 options a week. Even if the leap value started coming down due to market conditions, looking at it as an income generator would mean not caring what the value was. Hell, you may even get excited when that market drops so you can buy back the call you sold faster and sell another one. That's where the psychology aspect comes in. You could even roll the leap, go a little bit more in the money when needed to maintain it using the money you were generating, and just keep it going.

So the main thing would be to imagine what you paid for that leap call option being gone, but having income in its place and to me income is everything. Having (as reliable as can be) income every week beats all.

[cameronvincent]

Use you leaps to sell call with a lower expire date / synthetic coverd call

[torchy]

History shows the overall market will go up most of the time. Best not to listen to the noise.

[sahilsambyal]

80 delta leaps with low IV is a good risk/reward.

[donnyh]

I have a very small account and I do LEAPS, debit spreads, butterflies, credit spreads, the wheel, buy and hold momentum I'm trying it all. I definitely agree that I'm finding that the longer term plays often tie up funds for a frustratingly long time when I really want to be making trades, but it also helps keep a lid on it so that I don't over-trade.

[H.talha]

Imagine someone watching this video today after 2 years 😂

[darrensteves]

Thanks for the Vid! Agreed that LEAPS can be expensive in high priced stocks. I like to have a mixture of strategies and like LEAPS in low priced stocks that I think have a chance to increase in price greatly. Stocks like DKNG, PLTR and SOFI. They aren't too expensive. Spreads can be complete losses in a large market drop due to an event.

[InsideTheJoshMind]

I SELL leaps options for say like I have 2 going on Tesla at the 150 strike, 30, 000 in collateral
The 30, 000 I will make in the next month to two months or so, so from there I add the 30, 000 to my account and BUY stock with, while the put prints in the background over the next year (I sell for about a year out).
I don’t need to watch it and it will print (I aim for around 18-20% year over year return).
But I sell in total across portfolio puts up to 30-50% collateral of portfolio at any one given time.
In example, if my account is 100, 000 I would sell puts at any given point on stocks I’m good to own up to having to pay in to cover the additional 30-50 grand.
And I scale it up like that.
It prints returns on money that never existed.
And I haven’t gotten stuck in one by expiration yet. This way I don’t have to watch anything, I just run my business and put my focus where I make way way way more money than stocks. It’s just a money printer in the background.
Would love to discuss with you sometime if you’d be open to a conversation. Perhaps we can make eachother better.

[MrSlimdaddybim]

You hit the nail on the head with the buying power. Having a high buying power to trade credit spreads is a must

[necromancer]

OTM LEAPS are stupid. only one makes sense is ITM with low IV at the time of buy. you can do PMCC to reduce the cost

[rnbsn]

If you can exit out of any option play early to take profit or minimize losses then why is a leap bad if you can exit the play at anytime? Iam a new investor so sorry for the dumb question

[Doc_Ozzo]

I'll need to revisit LEAPS - I haven't used them in some time. The major advantage I found was is in the inherent leverage of the option - get your desired exposure to the underlying as % of the portfolio and take the excess cash and deploy in shorter term trading strategies (or whatever you want) and to cover the extrinisic you need only start selling calls.

[JosefTorkelsen]

One thing to consider is leaps spreads. I do them all the time. It is cheaper than leaps and the market still generally goes up. Granted, you have to deploy them at the right time with a highly liquid instrument.

[KeanuReevesIsMyJesus]

I think you have to qualify and tell people it’s a bad idea to BUY deep ITM PUT options. Especially if you’re a day trader. This is like betting that civilization will eventually collapse. I’m glad you stopped gambling this way.

Around the same time as your trade, I bought some deep ITM calls and 5x my money. If you’re doing a long term bet, it’s much safer to assume the market will bounce back.

Overall, this is a bad video, as you did not tell people exactly what you did wrong. Do you even understand what you did wrong?

[vidyasekharpotluri]

Thank you for providing in depth understanding on leaps. What do you think of synthetic covered call strategy?

[spydamark]

Hey good video. Im still waiting on that in depth video of whats better call credit spread vs put debit spread and all that good stuff but hopefully it comes down the pipe line but i digress 😂. Im actually in agreement with you on leaps as im not a fortune teller and cant get everything right but i will say this a broken clock is still right twice a day 😉. Ive been doing spreads on spy for about a month now and i dont know why i diddnt do this sooner. I have about a 80 percent win rate on it so far and im not a pro. Im not really that versed in technical analysis and im realizing i think in trading options which I think going forward is going to be my main form of trading, and buying long term stocks. The thing that works for me is just a clean chart with just support and resistance and looking at volume. I feel technical analysis yes is good to know but its more and more looking to me like a rorschach test and you will see what you want to see and its only telling you what happend in the past. This is getting long lol but spreads are my new best friend hopefully always avoiding early assignment on a leg if i can and taking assignment on the stocks i want to own and implementing more theta strategies. Best of luck to all on there trades and in life!