Hey Advanced Traders!
Taking Profits
We had a bull run with many of the LEAPS we purchased. Remember that you can always consider selling some of your LEAPS when you hit your profit target, of say, $250-350. You can also consider keeping your other LEAPS until the next earnings date, which will most likely be sometime in January.
Remember, all money is good money! If you are green, it's totally okay to take a profit!
Cycling LEAPS
If your LEAPS increased in price and you would like to sell them, I would like you to observe the delta your LEAPS are. You will most likely notice that the delta has increased in "speed" due to gamma and the further deeper ITM your LEAPS has become. For example, if you purchased a delta 0.65 LEAPS, you may see that your LEAPS may have grown to a delta 0.70. In this case, you can consider selling your LEAPS option and reenter with another 0.65 LEAPS. What will happen is that you will profit from selling your LEAPS and you can purchase a new LEAPS with less capital. With the profit that you make, I recommend that you compound your portfolio by investing it into long-term dividend paying stocks/ETFs.
Favorable LEAPS
Right now, I still favor MA, V, MSFT, AMD, AAPL, and HD. I would only recommend buying LEAPS that are ITM with deltas higher than 0.60-0.65, especially with a more volatile stock like AMD.
Spreading Your Risk
I also recommend spreading your risk over different stocks, rather than going all in on AMD since the underlying stock is "cheaper." Just in case one of your underlying stocks falls, you can have other ones that hold strong in the short-term.
New to LEAPS
If you are new to LEAPS, it's totally okay just to paper trade for now and to observe the markets. Always make sure to understand the general idea of how LEAPS work and how the Greeks and underlying affect pricing.
Contingency Plan
If you are entering some LEAPS options, just know that if the underlying decides to stall, you can convert your LEAPS into a PMCC trade. In this case, you can be mindful of the margin you decide to use so you can cover yourself when you sell your second leg.
Stay Disciplined
I know I sound like a broken record, but I truly want to make sure your portfolios are safe. Please make sure you follow the LEAPS purchasing guidelines. I know several of you made hundreds to thousands of dollars this year with LEAPS, but I still recommend that you do not go overboard with purchasing 50 LEAPS at once. Yes, your account will increase at an exponential rate during a bull market. However, if we have a surprise pullback, your account value will drop significantly!
With all this said, happy trading and investing!
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.
Comments