LEAPS Call: How to Join the Long-Term Market Rally at Lower Cost? | #OptionsHandbook EP049

If you’re bullish on a stock for the long run but don’t want to commit a big chunk of capital upfront, is there a smarter way to join the upside?🤔

Absolutely. The Options Handbook introduces the LEAPS Call strategy, which might be just what you need!

▶ What is a LEAPS Call?

LEAPS (Long-Term Equity Anticipation Securities) are just what they sound like: stock options with a long runway, typically expiring more than a year out, sometimes two years or even longer.

For example, in 2025, you could buy a LEAPS option that expires in January 2027.

In plain English, a LEAPS call lets you control a stock's upside for a fraction of the price, instead of coughing up the full amount to buy shares outright.

▶ A Simple Example

Suppose Company A’s stock is trading at $100 today, and you believe the price will rise over the next two years—but you don’t want to tie up too much cash. You have two choices:

1. Buy the stock directly. Purchasing 100 shares would cost you $10,000.

2. Buy a LEAPS Call instead. You choose a January 2027 call option priced at $15 per share. That means you only pay $15 × 100 = $1,500 to gain exposure to the same 100 shares’ upside potential.

▶ Why Choose LEAPS Calls?

• Capital Efficiency: With a LEAPS call, you just pay the option premium—a much smaller amount—and still get to profit if the stock climbs.

• Limited Downside: Owning shares could mean big losses if the stock tanks. With a LEAPS call, your maximum loss is just the premium you paid upfront.

• Leverage: LEAPS calls can supercharge your gains. If the stock moves up, your return on investment (ROI) with the option is often much higher than if you'd bought the stock.

• Slower Time Decay: Unlike short-term options that lose value quickly, LEAPS lose value (from the ticking clock) much more slowly, making them friendlier for patient investors.

▶ The Bottom Line

LEAPS calls are a powerful, flexible way to invest in your favourite stocks for the long haul, without tying up all your capital.

But remember: no strategy is risk-free. Time decay, volatility, and managing your position at expiration all matter.

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