Hey Advanced Traders!
Let's talk about some LEAPS candidates we can consider.
V:
I'm considering Visa as a potential LEAPS candidate because we had a quick sell off in the stock this week. Looking at historical patterns, Visa tends to bounce back up when its RSI hits around the 40's, as shown in the purple circles. You can also notice that Visa is on it's upward trending support line. Lastly, Visa reported their earnings last week, meaning that IV is lower at this time period. Remember, when IV is lower, it is often optimal for option buyers to purchase LEAPS options at a less inflated price.
If you are a beginner and want to purchase a LEAPS option, you can start off by investing in a January 20, 2023 LEAPS call option with a delta 0.75 for around $5380. You can hold onto this LEAPS option until a couple of days before Visa's next quarterly reports or if it hits a profit target of around $1000-$1500.
If you are more advanced and have the capital to do so, you can consider not only investing in a LEAPS option (as described above), but you can also trade a LEAPS option for a quick profit. I would consider buying a January 20, 2023 LEAPS call option with a delta 0.55 for around $3050. The goal for this LEAPS is to play "hot potato." Once you purchase the LEAPS option, you want to quickly sell it and pass it to the next person. You can consider a profit target of around $250-$500.
SBUX:
Similar to Visa, Starbucks also hit the bottom of it's long-term upward trending support line and announced earnings.
If you are a beginner and want to purchase a LEAPS option, you can start off by investing in a January 20, 2023 LEAPS call option with a delta 0.82 for around $3405. You can hold onto this LEAPS option until a couple of days before Starbuck's next quarterly reports or if it hits a profit target of around $500-$800.
If you are more advanced and have the capital to do so, you can consider not only investing in a LEAPS option (as described above), but you can also trade a LEAPS option for a quick profit. I would consider buying a January 20, 2023 LEAPS call option with a delta 0.63 for around $2075. You can consider a profit target of around $150-$300.
Conclusion:
I was thinking of buying LEAPS for MSFT, AAPL, and AMD last week. However, I'm noticing that these stocks are running a bit high at the moment and may want to cool down for the next couple of days. If you are still itching to buying a LEAPS on these companies, I would not buy anything under a delta 0.80 right now.
Remember that all the numbers I gave you are guidelines. It is more important for you to understand how the Greeks work and how that factors into risk. Feel free to tweak these numbers to your personal risk tolerance. If you are more conservative, you can always choose a higher delta and set a lower profit target. Or if you want to just observe, why not just paper trade for the moment?
I know I sound like a broken record saying this, but please make sure you don't go overboard with your LEAPS options. I don't want to see any beginners buying 50 LEAPS options right off the bat. I recommend not having more than 10% of your portfolio in LEAPS options. I also recommend to only purchase your LEAPS options with premiums you made from your Wheels. Remember that if the underlying stock goes the opposite way, your LEAPS option can drop dramatically.
Stay disciplined. You got this!
Steve and the Call to Leap Team
The following article is strictly the opinion of the author and is to not be considered financial/investment advice. Call to Leap LLC and the author of this article does not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article.
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