Awesome, LEAPS are one of my favorite strategies right now. Pick a stock you’re bullish on and hold it for a couple years. Roll it one year from expiration.
@@lloydaurion-gaming46 the option will get adjusted with it. Like when AAPL split, my 1 AAPL LEAPS at the $400 strike became 4 AAPL LEAPS with a $100 strike.
I'm very fresh. And I see its importance but get very confused between the 2. Can you break it down in simple terms? Short and sweet, not in nerdy jargon lol
I just want to say thank you for all that you've doing. Ever since I started investing, everyone has told me "don't trade options because they're dangerous". Your content gave me the confidence in starting to conduct covered calls and cash secured puts to generate additional income. Now with this video, I'm ready to branch out and give leaps a try. I learn so much from your videos!
@@nicky168 profit potential *** is what I meant. When you buy contracts with out of the money strikes, they gain more IF the stock moves in the direction you hoped. They’re cheaper as well. Little more risky obviously but the profit potential is higher. It’s like buying 10 contracts with $5k further from the money as opposed to 5 contracts with $5000 closer to the money or in the money.
Absolutely great teaching! The past couple months I’ve slowly been learning about options, and Friday at close I made my first $50, and reinvested into one apple contract! Slowly but surely~
Having my money work for me as much as I have worked for it met equilibrium after I started earning passive incomes from the financial markets. Currently I'm retired but I was able to build and own a 6figure portfolio from my previous investments
It's still sad how only such few are earning passively or even know what passive incomes are, investing as we know it can be the best thing anybody can actually indulge into because it can make probably anyone filthy rich when done properly. Investing in the financial markets and earning of it is surely the right way to go, because in reality wealth is practically built from multiple streams of incomes and not just salary alone.
A stock market, equity market or share market is the aggregation of buyers and sellers of stocks (also called shares) which represent ownership claims on businesses, these may include securities listed on a public stock exchange as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowd funding platforms. But I don't seem to understand why I still can't earn trading stocks ,I find it more complex than I ever thought 6figure portfolio that's massive meanwhile I'm still struggling to make my first $1000 Lol😂🤦🏼♀️. Do you still trade? because you said from previous trades, not I'm like I'm trying to invade I just need some help
Both bullish and bearish runs have always presented tremendous opportunities for profits to be gained, and of course I still get to invest but not trade and that is how it has been all along, all my trades are done via a licensed pro trader even before I got into retirement. I invest with Noud Mikan a FINRA registered trader and risk analyst, he manages my assets and also trades on my behalf in the markets, lucratively his ingeniousness and experience have been the reasons why I keep accumulating profits in stocks, crypto and real estates. I invested in some couple of high growth stocks like SHLL,NASDAQ:VRTX and I've made over a $million from long term investments, currently I'm earning an average of $67,000 monthly and that comes mostly from dividends and crypto alone. Noud has been a very astounding financial advisor 💙
@@philcrowley007 Some months ago I was watching this video as a newbie and that was how I came across your comment, couple of weeks after partnering with Mr Noud I can boastfully say he helped me in procuring profits from the foreign exchange markets and as of now I already have about $65k in my investments account and that is from a total of 3 payouts. The amount of financial advise I keep receiving under his guidance has been very helpful, I'm only here to show gratitude and to reaffirm that his trading system is indeed very profitable and his 1 on 1 approach has perfectly suited my expectations. Good man
Great explanation. LEAPS are great for everything you said and you can also sell PMCC's along the way for premium at lower cost. LEAPS can only be tricky with a global market frame shift event like in March of last year especially if your contract is too close to expiration and you lack the time to ride the recovery that owning 100 shares of the underlying would allow. For that reason I tend to not hold them all the way or too close to expiration. Ideally look for a sweet spot to sell where there's still liquidity so you don't lose all the EV and before rapid theta decay takes place.
I understand everything apart from when he starts talking about," If liquidity dries up just exercise it, buy 100 shares at the strike price and sell them at the current strike price."
As a new trader whose first experience was 1-2 week long options and day trades (and lost a bunch while learning risk management and emotional biases) this is very interesting. Going to follow this strategy in paper while i build up enough capital.
You've taught me 90% of what I know about options. Started watching your videos about 2 months ago, and I sold my first options this past week. Wanted to be sure I knew what I was doing before yeeting my money into the abyss. That said, seems like LEAPS are perfect for PMCCs. And, it seems like the others in the comment section had that same thought. Thanks for the continued motivation to learn about options and investing!
Preach. Love this. LEAPS and covered calls are so reasonable of an investment strategy that it seems hard to justify *not* doing them for even the most conservative investors. Question: for those of us who can't afford a 0.7+ delta LEAP, what are advantages/disadvantages to using 1+ year OTM (maybe 0.3 or 0.4 delta) calls? I know you are banking on reasonably significant movement of the stock and theta is much higher (comparatively at least), but it seems like a happy medium given that I don't have enough to buy deep ITM. Thanks again for the great videos. I've learned more from you than just about anyone else.
Adam: Thank you for this content. I'm probably not in your target audience, but wanted to let you know I am learning a great deal from you. This video especially has lit a fire under my arse...in a good way!! You're a good man for sharing your knowledge here for free. Thank you. Watching some of your more recent videos I saw that you were having some health issues and wanted to wish you the best on that front too. Hope to see you fully recovered soon!
How would that work if the covered call went bad and got exercised? Would Robinhood automatically exercise your call and then sell the shares at the covered call price, still netting a profit?
@@Failed4life_RS Any competent broker would not do such a thing. You would lose all of that extrinsic value. What this person is refers to is Poor Man's Covered Call(PMCC). You don't want the short to be exercised since you're trying to make some side passive income and reduce the overall theta of your long call. So you want to sell a bit OTM. In case an exercise of the short occurs you can buy the 100 stock and lose the difference between the strikes - the premium you received. Just make sure you sell before the 1 hour before the market close and take the loss if it goes way above your strike price you can make it back later with the premium. It wont be much of a loss either since your long premium will increase due to the delta. If your long call does not have much of extrinsic value anymore then it's likely that the broker will exercise it. You would profit either way.
@@Failed4life_RS It is called diagonal spread, you buy longer dated ITM call and sell shorted dated OTM calls but you need a marginable account for this.
Love your videos. Your videos have been extremely valuable to me learning different options strategies and the different risks associated with each strategy. You do a better job explaining options than any other RUclipsr I’ve seen while also making your videos entertaining.
These videos are so great Adam. As I close in on 100 shares of my long VOO position and also grow the portfolio value to the point where a LEAPS option would make sense to purchase at ~10% of the portfolio's value, I constantly refer back to videos like this and your videos covering Covered Calls and Poor Man's Covered Calls and they get me very excited. You are without a doubt the best creator on the platform for learning about options, and just an entertaining guy to listen to even if the video topic doesn't interest or pertain to me. Hoping you and your brother make a full recovery and come back stronger than ever. Until then I will continue dumping likes and views on your vids. Take care!
Best video on this topic I’ve seen- thanks. Would love to see a video expanding on this topic, especially selling covered calls on LEAPS (instead of owning 100 of the underlying).
If you’re out of the money at the end of the leaps contract your contract expires worthless. If you buy half the amount of shares in the underlying and hold for 2 years you can still continue to hold. It’s not necessarily doomed to loss forever.
I was just reading an article about LEAPS online, and they mentioned that implied volatility (vega) also impacts your final profit. It may not have a massive impact on profit, yet it's good to get in low if you see an opportunity. I'm quite new to LEAPS, but your video drastically helped my understanding. Keep up the excellent content!
Maybe I missed it, but I don't think you mentioned that you can sell calls against your LEAPS option , reducing even further the cost basis of your LEAPS option (poor man's covered call). Even if the underlying hits the strike price on the call you're selling, you have plenty of time left in your LEAPS option long leg to roll the short leg up and out for another credit. If you have a small account, this is the strategy you need to be using to grow your account.
Wow! This video is outstanding. You've earned yourself a subscriber. You're so right, why don't more people do it?... because it requires more brain power, but really it's not that complicated. I understand so much more now I've watched this. Loved it
Hey Adam. Just want to thank you for your videos, they are really cool! You explained LEAPs so well that I decided to give it a try. I bought Tesla options in April not too deep in the money though. Holding it up until now. 40% return so far. Thank you again, now I have started to understand some strategies. Continuing to follow your advice.
A stock market, equity market or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. And I'm making so much from my investments...Having profitable Investments are the best than savings...DO you know the feeling of waking to a rise in your portfolio or having passive incomes from your monthly investments in the online market??
"Now that's the LIFE"😋😋..I want myself a comfortable life after retirement,Heard much about investments and how lucrative it can turn out..Would be sweet having an investment plan that's lucrative and profitable too..How have you been making incomes
While in retirement making money in the online market has been my only source of income since I make so much investing in it..Invested in some couple of high growth stocks like SHLL,NASDAQ:VRTX and I've made over $1.1million over the past years under the aid of a financial trade analyst Hovik Morten.Who somehow keeps making me cool digits from my investments,I invest ($11000) in dividends under Hovik monthly and I yield profits of ($29000-$35000).
I'm a year and 2 months in the market...Some of these are my dividend stocks AMZN,TSLA,NIO,BNGO and I've been getting fat pay from them working with pro Hovik,my portfolio keeps rising positively having Hovik invest for me...Just got paid today🤑(Having my portfolio already at 390k)I own a house in Brooklyn.I invested into currency pairs earlier this year.Hovik got me some bonds and ETF's... real solid ones now I'm already getting way paid.
While I'm a huge fan of stock picking,I have made a few rather modest investments in individual companies.There are so many stocks going to rocket in the long run..I put $150k into some growth stocks with Mr Hovik Morten who handles my investments..some of my picks are AAPL, BNGO, NASDAQ, TSLA, I've gotten 88% on returns so far this year(getting my portfolio at 630k),I'll keep holding to see where it goes and how much I'll still earn
Great vid. Would love to see a tutorial on this similar to the covered call tutorial you did with thinkorswim, where you show the different possible outcomes.
I typed "Leaps options" into the search bar and was so damn relieved to see Adam at the number 2 spot. Like thank God... I know by the end of this video I will understand.
There is one other difference between owning 100 shares and owning a LEAPS, if you own the 100 shares you can receive a dividend. (you don't receive dividends if you own a call option) That being said, it is still worth doing the LEAPS and you can probably generate more money investing elsewhere, than you would receive from the quarterly dividend for 100 shares.
thanks for explaining this so well, but just one question from me; what is a good in the money strike price to choose for this LEAPS? How deep is deep?
Also, if you are very bullish in your investment, you could put the leftover funds into more of the same stock. For example, buying stock normally, AAPL, 100 shares at $133 would give you access to 100 shares of profit if the price moves up and you need $13,300 of funds. If you used leaps, expiry date in 1 year and 3 months, and you bought 2 contracts at $60 strike price, for $7360 each, you would get access to 200 shares of profit if the stock price goes up for a total funds needed of $14,720. The extrinsic value of each contract is $1360 per contract, which will decay over 1 year and 3 months, if you sold to close the option, you would get the remainder of that extrinsic value back. What an incredible leveraging tool
*Thanks for your comment, there's a strategy on how to invest & profit more in Crypto right now I will advice you contact my manager of FINRA investment institute on whats-app for assistance, if you want to make great ROI like I do.*
What is the comparison though if you own 100 shares and sell covered calls as opposed to buying a LEAP? Seems covered calls have the greater potential as you get cash as you sell the calls plus if the shares go up in price you can sell for profit so long as you are writing call options far enough out of the money to ensure you don't get assigned.
Not sure what you mean by dream? I sell Covered Calls on LEAPS for 5 to 10% monthly income that I then buy crypto currency with lol. You can Zoomer the Boomer practices. BTC from $5K to $40K this year has me slapping my... Well, let's just say 2020 has been the best investment year of my life.
@@ayomide9887 Watch all the videos on this guy's channel, but the two strategies I use personally, research Cash Secured Puts and the Poor Man's Covered Calls (PMCC). Some RUclipsrs also call them Synthetic Covered Calls or Surrogate Covered Calls, but they are all just a Poor Man's Covered Call (PMCC). Cash Secured Puts are my absolute favorite investing tool, but PMCCs are fantastic for stocks you are Bullish on long term but want to make income on while the underlying LEAPS grows with the stock. Remember, trading has many risks, educate yourself on the type of investment that fits your goals, otherwise it's just gambling and you might as well go to a casino. Watch as many videos as you can on PMCC and Cash Secured Puts. I have been using them for years but I still watch videos on them to see how others perceive them and their risks and sometimes I am inspired by what someone is using the positions for, ideas that have been productive. Have a good 2021 and be responsible. Trading is a business just like running a hair salon or coffee shop.
I feel like we’re maybe glossing over the fact that stocks don’t expire, options do. So the comparison is invalid. If your options expire worthless you’re screwed. But if your stock is way down (so long as the company isn’t garbage) you have the choice to hodl and not realize the loss. I understand the need to make a comparison between owning 100 shares and owning a call option, but it’s like calling time of death on a couple when only one of them is dead (that surviving spouse still has some potential).
I’m a very small account beginner 2-5k. I was happy to start getting some weekly profit with cash secured puts on low priced, high iv stocks. I started doing some weekly debit spreads, which helps since I can pick stocks with lower IV. Was saving up for a leap with Apple, but that +10 jump this past week put that out of consideration. Ended up getting one on SNAP before earnings, hoping to get enough from covered calls, and using the rest on debit spreads to build up to AMD, then AAPL again
One thing to be aware of is that if your LEAPs go further out of the money, Gamma accelerates and thus your delta decreases exponentially - good thing to know if you're using LEAPs as a synthetic equivalent to stock
Why would anyone sell leaps (calls)? How does the writer profits? Is this some equivalent to shorting the stock, and getting the extrinsic value as a bonus?
I would think this is the case. Furthermore, it might make more sense to write LEAP than to short for a mid to large-cap stock, since it is unlikely to drop below however deep in the money you set the LEAP to be.
The volume for LEAPS is pretty low but market makers and large institutions sell these as hedges against large downturns. I buy almost exclusively $SPY and $AAPL leaps (two of the most liquid options in existence) and there’s still only ever maybe 50-100 open interest on the DEEP ITM ones I want. You almost always have to meet the ask vs the bid to start out.
I mean this in the best most complimentary way possible, but when I look at a picture of the Wallstreetbets dude, then I look at your face, I see the WSB dude. You two are one and the same. I think they modeled the icon after you. You legend.
what would it look like if you cant sell your option. doesnt robinhood automatically sell your call at expiration if you cant afford to buy the shares? what do you do if you cant afford to exercise?
I'm not an expert, so correct me if I'm wrong. I'm guessing RH would sell your leaps, or they would exercise it and you'd owe money, showing a negative balance you'd have to pay ASAP. However, you will always be able to sell your contract, just at not the price you'd like. Algos will price accordingly so that they can benefit off of a wide bid-ask. Picking an underlying with no volume/interest and a call that is very deep ITM will result in a wider spread. It's one of the small drawbacks of buying a leap. You buy a leap, paying more than the mid-price and later on sell less than the mid-price. . . but hopefully, the underlying has risen to where you have an overall greater increase on return while only putting a fraction of money up in the first place.
And the icing on the cake. Sell calls against it in front months to eliminate the extrinsic entirely. Basically sell covered calls for 1/10 the cost of holding the shares.
Man your videos are awesome and i come back whenever im lost with options. You get me understanding then i get lost and gain and then i get it again then i get lost again....you get the point but you explain it the best IMO
Disagree: it's riskier owning call options. Invested amount x can be 100% lost with either, but call options yields a 100% loss at anything less than a very specific price or at a very specific time, whereas stocks only result in a total loss if it reaches 0 (extremely unlikely in an index) and even if the stock did reach 0, you have the ability to wait as long as you want to see if the value will go back up, something you don't have with options. Call options can result in a total loss if the price is far above 0 at "near" expiration. Therefore you are wrong.
I like this breakdown. I play LEAPS, although sometimes the bid/ask spread is too wide to be filled, or the option is too expensive. However, I was playing mine closer to ATM because I'm not made of Bitcoins. More downside protection, at the loss of upside for the first few dollar gains.
Solid video! The downside depends on what you do with that extra cash. Worst case scenario is you used that cash to buy another leap contract. At some point the market crashes and now a 30% downside move(or whatever amount to your leap) is now a 100% loss for you. In a bullish market, this works great! In a bearish market, your losses are also magnified as a % of your total portfolio.
Great video 👍 *but only useful for stocks trading at low IV* Higher IV stocks, like MARA and RIOT, have enormous extrinsic premium, and if BTC consolidates sideways for 6 months your leaps would get crushed.
What I didn't understand until I actually did it, is that you can still sell it to close before losing your entire premium. I thought it was all or nothing so I chose to buy the stocks outright so I could sell if it went the wrong way.
Thanks for your videos man. I’m so new to trading and it scares me but is exhilarating. I’ve quadrupled my money since I began in March and I’m day trading now with what I’ve earned. I’m totally clueless on options still...My entire plan is just make money on 1% - 10% upticks every day to supplement my income and it seems to be working. I’ve done well on clean energy. That sounds stupid though when I say it out loud. Not sure how long I can keep this up.
@@scottreesetradinginvesting7936 I’m still clueless on options. Seems more high risk. Made good money on doge coin and crypto lately. Quit my desk job to trade and travel. Finviz and scanning in general have done me well speculatively. Not sure if I’ll ever buy an option but maybe some day haha
Hi Adam, I really learn a lot from your videos, thank you so much. One question about LEAPS, please: One difference between buying a stock and buying a LEAP on that stock is the equity, if you buy that stock, vs. no equity for the LEAP. What do you think about this? Or maybe I just don't understand something basic about LEAPs?
Something you hinted to but didn’t explicitly explain is what happens if the underlying falls to (or approaches) your strike with considerable time remaining. Your option will gain significant extrinsic value as it shifts from ITM to ATM. The shares and contract would lose the same intrinsic value. However, the option’s extrinsic value may increase from $150 to say $1000 as it gets ATM. In this scenario, the LEAPS is actually less risky than owning stock farther out from expiration.
Just found your channel and I have to say I’m impresssed. Your mind goes so fast that your words can’t even catch up your thoughts 😂😂😂 Adding this strategy to my arsenal. Thanks for this dude, truly appreciate it. Will be looking to join your paid membership if there is one. 👍🏻
Great video and love that your willing to re-explain things. The only suggestion I would make is that you tend to talk just a little faster than I'm capable of keeping up with and would appreciate if you could just go a tad slower please and thanks!
I was looking through your videos for an explanation on taxes charged for the trades. I am still not fully understanding how that works. Thank you for sharing your knowledge! It’s helping me understand little by little 🙏🏻
There needs to be liquidity to sell or you need to have the cash to exercise. The benefits are (from what I see)... freeing up liquidity and limiting loss if the stock turns down. You won’t collect dividends and selling CCs against the position doesn’t seem prudent.
What happens with leap calls too is you have to have a strong stomach for fluctuations also months worth of waiting can get destroyed in a few days and mentally it's easy to call it a day after that happens while with a stock the time to hold is endless.
I like to buy LEAPS options that are just out of the money, when the stock has dipped a great deal. Then it rises slightly and I am making 10% profit very quickly. Have been doing this over and over.
Great, great videos. You’ve earned a subscriber! Thank you for the education, right before I leap into a trade I watch your videos for that extra confidence
Appreciate your comment⬇️ Expert Brandon is urgently handling my crypto for me and he is making me huge profit turning 2 BTC into 4 BTC in 9 days and making me $400,000 weekly by putting $50,000 indeed am amazed..
Do you miss out on dividends over those two years by owning a LEAPS vs owning the stock? Might not be a huge deal but you should probably include it in the conversation because it is relevant
This is THE real life wall street bets cartoon guy!🤣
Wahahha!
The Kid
🤣
100% love this guy though.
He has a twin. If he was WSB mascot, one could be "Calls" and the other "Puts".
Awesome, LEAPS are one of my favorite strategies right now. Pick a stock you’re bullish on and hold it for a couple years. Roll it one year from expiration.
@Kamikaze Cash watched ur LEAPS video when it came out. Between these two videos feel like I’ve got a good understanding of it
You and Adam are where I have learned options. Love the wsb lingo from your videos while Adam is more technical :) imo it’s good to learn both.
Also to you or Adam: when a stock split occurs, what happens to an option? Like the strike price and anything else associated with an option
@@lloydaurion-gaming46 the option will get adjusted with it. Like when AAPL split, my 1 AAPL LEAPS at the $400 strike became 4 AAPL LEAPS with a $100 strike.
@@KamikazeCash oh I see thank you. I figured that would be how it worked. I just wasn’t completely sure if options worked differently
This is damn smart... everytime i learn something new I'm shocked at how much more there is to learn. Thanks for the awesome vids.
@Improvement pill No
Facts
Exactly what i was thinking 😍
Then you become more aware of the things that you don't know, so even though you've learned a lot, you feel like you know less. Human psych is funny
That cinematic desk rise though
Who cares
@@YouArentThatImportant I do
Was expecting the Imperial March to hit
Lmao. I laugh every time i see that part
Should have done it it slow motion!!1!
I personally love that you cover extrinsic and intrinsic value in most videos. New Option traders NEED to hear it and understand it. Thank you sir!
I'm very fresh. And I see its importance but get very confused between the 2. Can you break it down in simple terms? Short and sweet, not in nerdy jargon lol
I just want to say thank you for all that you've doing. Ever since I started investing, everyone has told me "don't trade options because they're dangerous". Your content gave me the confidence in starting to conduct covered calls and cash secured puts to generate additional income. Now with this video, I'm ready to branch out and give leaps a try. I learn so much from your videos!
I mostly trade leaps but I’ve never tried going so deep in the money. Thank you for explaining this so well! ❤️
@@Steve-sz4bh why is that?
Buying leaps deep in the money reduces the upside potential and they cost more.
@@Steve-sz4bh you mad? 😂😂
@@cmichole how is the upside potential reduced?
@@nicky168 profit potential *** is what I meant. When you buy contracts with out of the money strikes, they gain more IF the stock moves in the direction you hoped. They’re cheaper as well. Little more risky obviously but the profit potential is higher. It’s like buying 10 contracts with $5k further from the money as opposed to 5 contracts with $5000 closer to the money or in the money.
Absolutely great teaching! The past couple months I’ve slowly been learning about options, and Friday at close I made my first $50, and reinvested into one apple contract! Slowly but surely~
Rainititan@gmail.com)
Where are you from
This video has some of the most under rated wisdom on all of RUclips.
it came out 2 hours ago, how can i already be under rated?
@@TRW-Apprentice The wisdom has been around for a while my friend
@@TRW-Apprentice prolly meant the channel
Having my money work for me as much as I have worked for it met equilibrium after I started earning passive incomes from the financial markets. Currently I'm retired but I was able to build and own a 6figure portfolio from my previous investments
It's still sad how only such few are earning passively or even know what passive incomes are, investing as we know it can be the best thing anybody can actually indulge into because it can make probably anyone filthy rich when done properly. Investing in the financial markets and earning of it is surely the right way to go, because in reality wealth is practically built from multiple streams of incomes and not just salary alone.
A stock market, equity market or share market is the aggregation of buyers and sellers of stocks (also called shares) which represent ownership claims on businesses, these may include securities listed on a public stock exchange as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowd funding platforms. But I don't seem to understand why I still can't earn trading stocks ,I find it more complex than I ever thought
6figure portfolio that's massive meanwhile I'm still struggling to make my first $1000 Lol😂🤦🏼♀️. Do you still trade? because you said from previous trades, not I'm like I'm trying to invade I just need some help
Both bullish and bearish runs have always presented tremendous opportunities for profits to be gained, and of course I still get to invest but not trade and that is how it has been all along, all my trades are done via a licensed pro trader even before I got into retirement. I invest with Noud Mikan a FINRA registered trader and risk analyst, he manages my assets and also trades on my behalf in the markets, lucratively his ingeniousness and experience have been the reasons why I keep accumulating profits in stocks, crypto and real estates. I invested in some couple of high growth stocks like SHLL,NASDAQ:VRTX and I've made over a $million from long term investments, currently I'm earning an average of $67,000 monthly and that comes mostly from dividends and crypto alone. Noud has been a very astounding financial advisor 💙
Scam
@@philcrowley007 Some months ago I was watching this video as a newbie and that was how I came across your comment, couple of weeks after partnering with Mr Noud I can boastfully say he helped me in procuring profits from the foreign exchange markets and as of now I already have about $65k in my investments account and that is from a total of 3 payouts. The amount of financial advise I keep receiving under his guidance has been very helpful, I'm only here to show gratitude and to reaffirm that his trading system is indeed very profitable and his 1 on 1 approach has perfectly suited my expectations. Good man
1:58 smooth af nicely edited sir
Great explanation. LEAPS are great for everything you said and you can also sell PMCC's along the way for premium at lower cost. LEAPS can only be tricky with a global market frame shift event like in March of last year especially if your contract is too close to expiration and you lack the time to ride the recovery that owning 100 shares of the underlying would allow. For that reason I tend to not hold them all the way or too close to expiration. Ideally look for a sweet spot to sell where there's still liquidity so you don't lose all the EV and before rapid theta decay takes place.
Market shift came to mind, seeing this video in 2022 (down market)
I understand everything apart from when he starts talking about," If liquidity dries up just exercise it, buy 100 shares at the strike price and sell them at the current strike price."
@@scottreesetradinginvesting7936 thank you again Scott
As a new trader whose first experience was 1-2 week long options and day trades (and lost a bunch while learning risk management and emotional biases) this is very interesting. Going to follow this strategy in paper while i build up enough capital.
You've taught me 90% of what I know about options. Started watching your videos about 2 months ago, and I sold my first options this past week. Wanted to be sure I knew what I was doing before yeeting my money into the abyss. That said, seems like LEAPS are perfect for PMCCs. And, it seems like the others in the comment section had that same thought. Thanks for the continued motivation to learn about options and investing!
Contact him on
W.a.s.a.p
+1...3...4...6..3....5...8...7...9..6...6
Explanation about extrinsic vs intrinsic ends at 5:36 yw
Preach. Love this. LEAPS and covered calls are so reasonable of an investment strategy that it seems hard to justify *not* doing them for even the most conservative investors.
Question: for those of us who can't afford a 0.7+ delta LEAP, what are advantages/disadvantages to using 1+ year OTM (maybe 0.3 or 0.4 delta) calls? I know you are banking on reasonably significant movement of the stock and theta is much higher (comparatively at least), but it seems like a happy medium given that I don't have enough to buy deep ITM.
Thanks again for the great videos. I've learned more from you than just about anyone else.
Adam: Thank you for this content. I'm probably not in your target audience, but wanted to let you know I am learning a great deal from you. This video especially has lit a fire under my arse...in a good way!! You're a good man for sharing your knowledge here for free. Thank you. Watching some of your more recent videos I saw that you were having some health issues and wanted to wish you the best on that front too. Hope to see you fully recovered soon!
Don't forget that you can also sell covered calls against your LEAPS.
How would that work if the covered call went bad and got exercised? Would Robinhood automatically exercise your call and then sell the shares at the covered call price, still netting a profit?
@@Failed4life_RS Any competent broker would not do such a thing. You would lose all of that extrinsic value. What this person is refers to is Poor Man's Covered Call(PMCC). You don't want the short to be exercised since you're trying to make some side passive income and reduce the overall theta of your long call. So you want to sell a bit OTM. In case an exercise of the short occurs you can buy the 100 stock and lose the difference between the strikes - the premium you received. Just make sure you sell before the 1 hour before the market close and take the loss if it goes way above your strike price you can make it back later with the premium. It wont be much of a loss either since your long premium will increase due to the delta. If your long call does not have much of extrinsic value anymore then it's likely that the broker will exercise it. You would profit either way.
gotta lower that cost basis, baaabbyy!
Adam has a video about poor man's covered call, I tried to post a link here but looks like links are not allowed or something.
@@Failed4life_RS It is called diagonal spread, you buy longer dated ITM call and sell shorted dated OTM calls but you need a marginable account for this.
Good info. I've been debating whether or not to buy way in the money calls. Now I'm more convinced than ever to buy some on a red day. thanks
Love your videos. Your videos have been extremely valuable to me learning different options strategies and the different risks associated with each strategy. You do a better job explaining options than any other RUclipsr I’ve seen while also making your videos entertaining.
These videos are so great Adam. As I close in on 100 shares of my long VOO position and also grow the portfolio value to the point where a LEAPS option would make sense to purchase at ~10% of the portfolio's value, I constantly refer back to videos like this and your videos covering Covered Calls and Poor Man's Covered Calls and they get me very excited. You are without a doubt the best creator on the platform for learning about options, and just an entertaining guy to listen to even if the video topic doesn't interest or pertain to me.
Hoping you and your brother make a full recovery and come back stronger than ever. Until then I will continue dumping likes and views on your vids.
Take care!
Genuinely one of my favorite youtube channels. Thanks for the upload man
Best video on this topic I’ve seen- thanks. Would love to see a video expanding on this topic, especially selling covered calls on LEAPS (instead of owning 100 of the underlying).
These videos are exactly what I’m looking for. Thanks!
I have watched a few of your videos now and this was by far your best explaination of intrinsic and extrinsic value.
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Rainititan@gmail.com))
If you’re out of the money at the end of the leaps contract your contract expires worthless. If you buy half the amount of shares in the underlying and hold for 2 years you can still continue to hold. It’s not necessarily doomed to loss forever.
I was just reading an article about LEAPS online, and they mentioned that implied volatility (vega) also impacts your final profit. It may not have a massive impact on profit, yet it's good to get in low if you see an opportunity. I'm quite new to LEAPS, but your video drastically helped my understanding. Keep up the excellent content!
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Maybe I missed it, but I don't think you mentioned that you can sell calls against your LEAPS option , reducing even further the cost basis of your LEAPS option (poor man's covered call). Even if the underlying hits the strike price on the call you're selling, you have plenty of time left in your LEAPS option long leg to roll the short leg up and out for another credit. If you have a small account, this is the strategy you need to be using to grow your account.
Wow! This video is outstanding. You've earned yourself a subscriber. You're so right, why don't more people do it?... because it requires more brain power, but really it's not that complicated. I understand so much more now I've watched this. Loved it
Did you explain what happens to the dividends? I might have missed it.
I don't think anyone in the world could get their point across better than this guy.
Hmmm. Seems like we had the perfect opportunity to buy BABA leaps a few days ago
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Hey Adam. Just want to thank you for your videos, they are really cool! You explained LEAPs so well that I decided to give it a try. I bought Tesla options in April not too deep in the money though. Holding it up until now. 40% return so far. Thank you again, now I have started to understand some strategies. Continuing to follow your advice.
hope you closed it while you were up as tsla is now 147
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I've wondered this since the very second I saw an options spread
11:02 lol subbed this guy is genuinely passionate
THANK YOU!!! I wanted to get into leaps this week, this helps so much :)
Rainititan@gmail.com)
Best options channel on RUclips no question
Great vid. Would love to see a tutorial on this similar to the covered call tutorial you did with thinkorswim, where you show the different possible outcomes.
That transition to the monitor was dope
So much nerdy information made incredibly easy to understand. I feel smarter just hearing him talk.
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low key flex with the table ℓσℓ
There was nothing low key about that.
No dividends with LEAPS
A well deserved like for this information.
I typed "Leaps options" into the search bar and was so damn relieved to see Adam at the number 2 spot. Like thank God... I know by the end of this video I will understand.
Update:
I finished the video. One time through and I have a complete understanding of leaps. Totally makes sense. Thanks Adam!
Thanks for all your work man ... taught me more in a few videos then months of studying
There is one other difference between owning 100 shares and owning a LEAPS, if you own the 100 shares you can receive a dividend. (you don't receive dividends if you own a call option) That being said, it is still worth doing the LEAPS and you can probably generate more money investing elsewhere, than you would receive from the quarterly dividend for 100 shares.
thanks for explaining this so well, but just one question from me; what is a good in the money strike price to choose for this LEAPS? How deep is deep?
Also, if you are very bullish in your investment, you could put the leftover funds into more of the same stock. For example, buying stock normally, AAPL, 100 shares at $133 would give you access to 100 shares of profit if the price moves up and you need $13,300 of funds.
If you used leaps, expiry date in 1 year and 3 months, and you bought 2 contracts at $60 strike price, for $7360 each, you would get access to 200 shares of profit if the stock price goes up for a total funds needed of $14,720.
The extrinsic value of each contract is $1360 per contract, which will decay over 1 year and 3 months, if you sold to close the option, you would get the remainder of that extrinsic value back.
What an incredible leveraging tool
Thanks for the video. I’ve been a fan for a couple years. I hope you’re feeling better Adam!
Thank you!
Your first mistake was assuming I could actually afford to buy 100 shares of the stock lol 😂
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What is the comparison though if you own 100 shares and sell covered calls as opposed to buying a LEAP? Seems covered calls have the greater potential as you get cash as you sell the calls plus if the shares go up in price you can sell for profit so long as you are writing call options far enough out of the money to ensure you don't get assigned.
Alternate title: Boomer disguised as zoomer secretly tricks other zoomers into buying shares-adjacent product.
Not sure what you mean by dream? I sell Covered Calls on LEAPS for 5 to 10% monthly income that I then buy crypto currency with lol. You can Zoomer the Boomer practices. BTC from $5K to $40K this year has me slapping my... Well, let's just say 2020 has been the best investment year of my life.
@@Slydeish bro how can I learn
@@ayomide9887 Watch all the videos on this guy's channel, but the two strategies I use personally, research Cash Secured Puts and the Poor Man's Covered Calls (PMCC). Some RUclipsrs also call them Synthetic Covered Calls or Surrogate Covered Calls, but they are all just a Poor Man's Covered Call (PMCC). Cash Secured Puts are my absolute favorite investing tool, but PMCCs are fantastic for stocks you are Bullish on long term but want to make income on while the underlying LEAPS grows with the stock. Remember, trading has many risks, educate yourself on the type of investment that fits your goals, otherwise it's just gambling and you might as well go to a casino. Watch as many videos as you can on PMCC and Cash Secured Puts. I have been using them for years but I still watch videos on them to see how others perceive them and their risks and sometimes I am inspired by what someone is using the positions for, ideas that have been productive. Have a good 2021 and be responsible. Trading is a business just like running a hair salon or coffee shop.
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@@Slydeish this is gangster advice man. I'm going to look into his vids a bit more. Can't just YOLO GME and PLTR to the moon forever
I feel like we’re maybe glossing over the fact that stocks don’t expire, options do. So the comparison is invalid. If your options expire worthless you’re screwed. But if your stock is way down (so long as the company isn’t garbage) you have the choice to hodl and not realize the loss. I understand the need to make a comparison between owning 100 shares and owning a call option, but it’s like calling time of death on a couple when only one of them is dead (that surviving spouse still has some potential).
I’m a very small account beginner 2-5k. I was happy to start getting some weekly profit with cash secured puts on low priced, high iv stocks. I started doing some weekly debit spreads, which helps since I can pick stocks with lower IV. Was saving up for a leap with Apple, but that +10 jump this past week put that out of consideration. Ended up getting one on SNAP before earnings, hoping to get enough from covered calls, and using the rest on debit spreads to build up to AMD, then AAPL again
One thing to be aware of is that if your LEAPs go further out of the money, Gamma accelerates and thus your delta decreases exponentially - good thing to know if you're using LEAPs as a synthetic equivalent to stock
Can you do a video on how options are taxed?
Like capital gains tax? Irs tax?
How the Premium is taxed. I hear someone say it wasn't, that it goes instead to reducing the base cost of the underlying
This is bar far the most helpful RUclips video I've found on Leap Options.
Explaining this is more difficult than doing it. Bravo sir. Great job.. I could never explain this to people!
Why would anyone sell leaps (calls)? How does the writer profits? Is this some equivalent to shorting the stock, and getting the extrinsic value as a bonus?
I would think this is the case. Furthermore, it might make more sense to write LEAP than to short for a mid to large-cap stock, since it is unlikely to drop below however deep in the money you set the LEAP to be.
The volume for LEAPS is pretty low but market makers and large institutions sell these as hedges against large downturns.
I buy almost exclusively $SPY and $AAPL leaps (two of the most liquid options in existence) and there’s still only ever maybe 50-100 open interest on the DEEP ITM ones I want. You almost always have to meet the ask vs the bid to start out.
Best explanation of a lease option I have heard on RUclips
I mean this in the best most complimentary way possible, but when I look at a picture of the Wallstreetbets dude, then I look at your face, I see the WSB dude. You two are one and the same. I think they modeled the icon after you. You legend.
what would it look like if you cant sell your option. doesnt robinhood automatically sell your call at expiration if you cant afford to buy the shares? what do you do if you cant afford to exercise?
I'm not an expert, so correct me if I'm wrong.
I'm guessing RH would sell your leaps, or they would exercise it and you'd owe money, showing a negative balance you'd have to pay ASAP.
However, you will always be able to sell your contract, just at not the price you'd like. Algos will price accordingly so that they can benefit off of a wide bid-ask. Picking an underlying with no volume/interest and a call that is very deep ITM will result in a wider spread. It's one of the small drawbacks of buying a leap. You buy a leap, paying more than the mid-price and later on sell less than the mid-price. . . but hopefully, the underlying has risen to where you have an overall greater increase on return while only putting a fraction of money up in the first place.
And the icing on the cake. Sell calls against it in front months to eliminate the extrinsic entirely. Basically sell covered calls for 1/10 the cost of holding the shares.
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Man your videos are awesome and i come back whenever im lost with options. You get me understanding then i get lost and gain and then i get it again then i get lost again....you get the point but you explain it the best IMO
Disagree: it's riskier owning call options. Invested amount x can be 100% lost with either, but call options yields a 100% loss at anything less than a very specific price or at a very specific time, whereas stocks only result in a total loss if it reaches 0 (extremely unlikely in an index) and even if the stock did reach 0, you have the ability to wait as long as you want to see if the value will go back up, something you don't have with options. Call options can result in a total loss if the price is far above 0 at "near" expiration. Therefore you are wrong.
I like this breakdown. I play LEAPS, although sometimes the bid/ask spread is too wide to be filled, or the option is too expensive. However, I was playing mine closer to ATM because I'm not made of Bitcoins. More downside protection, at the loss of upside for the first few dollar gains.
Solid video! The downside depends on what you do with that extra cash. Worst case scenario is you used that cash to buy another leap contract. At some point the market crashes and now a 30% downside move(or whatever amount to your leap) is now a 100% loss for you. In a bullish market, this works great! In a bearish market, your losses are also magnified as a % of your total portfolio.
Assuming there is no liquidity and I don't have enough funds to exercise, what happens then?
Then it's best to let it expire. You are just out the premium
Great video 👍 *but only useful for stocks trading at low IV*
Higher IV stocks, like MARA and RIOT, have enormous extrinsic premium, and if BTC consolidates sideways for 6 months your leaps would get crushed.
Dude you don’t know how much your videos have helped me learn options. Thank you so much, hope you get the best!
What I didn't understand until I actually did it, is that you can still sell it to close before losing your entire premium. I thought it was all or nothing so I chose to buy the stocks outright so I could sell if it went the wrong way.
I LOVE this explanation! It makes so much sense and I'm excited to take advantage of this super easy concept going forward. Excellent video 🔥🔥
I think about this video often. The timing of it couldn’t be more perfect 😂
Thanks for your videos man. I’m so new to trading and it scares me but is exhilarating. I’ve quadrupled my money since I began in March and I’m day trading now with what I’ve earned. I’m totally clueless on options still...My entire plan is just make money on 1% - 10% upticks every day to supplement my income and it seems to be working. I’ve done well on clean energy. That sounds stupid though when I say it out loud. Not sure how long I can keep this up.
@@scottreesetradinginvesting7936 I’m still clueless on options. Seems more high risk. Made good money on doge coin and crypto lately. Quit my desk job to trade and travel. Finviz and scanning in general have done me well speculatively. Not sure if I’ll ever buy an option but maybe some day haha
Omg it's soo deep.
Deep ITM
Deep ITM
Hi Adam, I really learn a lot from your videos, thank you so much. One question about LEAPS, please: One difference between buying a stock and buying a LEAP on that stock is the equity, if you buy that stock, vs. no equity for the LEAP. What do you think about this? Or maybe I just don't understand something basic about LEAPs?
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I have always known of LEAPS, but did not fully understand the benefits of this strategy! Thank you!
You answered my question about liquidity which makes perfect sense. Excellent presentation.
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Something you hinted to but didn’t explicitly explain is what happens if the underlying falls to (or approaches) your strike with considerable time remaining. Your option will gain significant extrinsic value as it shifts from ITM to ATM. The shares and contract would lose the same intrinsic value. However, the option’s extrinsic value may increase from $150 to say $1000 as it gets ATM. In this scenario, the LEAPS is actually less risky than owning stock farther out from expiration.
Holy crap! My eyes are now open! Great video!
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Just found your channel and I have to say I’m impresssed. Your mind goes so fast that your words can’t even catch up your thoughts 😂😂😂 Adding this strategy to my arsenal. Thanks for this dude, truly appreciate it. Will be looking to join your paid membership if there is one. 👍🏻
Great video and love that your willing to re-explain things. The only suggestion I would make is that you tend to talk just a little faster than I'm capable of keeping up with and would appreciate if you could just go a tad slower please and thanks!
I was looking through your videos for an explanation on taxes charged for the trades. I am still not fully understanding how that works. Thank you for sharing your knowledge! It’s helping me understand little by little 🙏🏻
Excellent explanation. Haven't heard anyone explain this clearer.
I think the fair comparison would be $X in one strategy vs $X in the other strategy -- that adequately captures the risk-reward tradeoff.
There needs to be liquidity to sell or you need to have the cash to exercise. The benefits are (from what I see)... freeing up liquidity and limiting loss if the stock turns down. You won’t collect dividends and selling CCs against the position doesn’t seem prudent.
What happens with leap calls too is you have to have a strong stomach for fluctuations also months worth of waiting can get destroyed in a few days and mentally it's easy to call it a day after that happens while with a stock the time to hold is endless.
great vid brother... you did forget to mention thta with LEAPS you dont get dividends, that Apple pays quarterly. nonetheless, im a LEAPS fan too.
Great explanation. You vids are now my go to for investment education
Outstanding use of that "Big short" clip
I like to buy LEAPS options that are just out of the money, when the stock has dipped a great deal. Then it rises slightly and I am making 10% profit very quickly. Have been doing this over and over.
Great, great videos. You’ve earned a subscriber! Thank you for the education, right before I leap into a trade I watch your videos for that extra confidence
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Do you miss out on dividends over those two years by owning a LEAPS vs owning the stock? Might not be a huge deal but you should probably include it in the conversation because it is relevant