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LEAPS - PowerPoint PPT Presentation


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LEAPS. Long Term Equity Anticipation Securities. LEAPS. Basically a Long Term Option Minimum of 1 Year Out Maximum of 3 Years Out Excellent Investment Tool For Retirement Accounts Advantage of Leverage Ideal for Conservative Investors. Searches/Selection . Investools Big Chart

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leaps

LEAPS

Long Term Equity

Anticipation Securities

leaps1
LEAPS
  • Basically a Long Term Option
  • Minimum of 1 Year Out
  • Maximum of 3 Years Out
  • Excellent Investment Tool For Retirement Accounts
  • Advantage of Leverage
  • Ideal for Conservative Investors
searches selection
Searches/Selection
  • Investools Big Chart
    • Future Industries/Sectors That Will Remain Strong
  • Bullish Searches
    • Strong Stocks in Multiple Time Periods
    • Great Earnings, Sales and Cash Flow Growth
    • Growth Stock Strategy #1
    • Growth Stock Strategy #2
  • Global Search
    • Customize
  • IBD (Investors Business Daily) 100
strategies
Strategies
  • Can Be Used on Traditional Stocks or on Equity Indices
  • Alternative to Outright Stock Purchase
  • Can Be Used on Stocks That Have Recently Split
  • Can Sell a Current Month Call on a Future Position (Like a Covered Call)
traditional stock equity index
Traditional Stock/Equity Index
  • Not All S/E Have LEAPS – CBOE
  • Are High Premium Because of Longer Period of Time Value
  • Break Even Point at Expiration Higher Than Usual
  • Examples: POT, RIMM, GG
pot potash corp 12 3 07
POT – Potash Corp 12/3/07
  • Straight Purchase
    • $123.84 for 100 Shares = $12,384
  • LEAPS Purchase January 2010 (Exp 774)
  • Deep In The Money vs Out of The Money
    • Investment Diff = $1250 / B/E Diff = $17.50
    • Deep In The Money
      • $100 Call $52.30 Premium = $5230 B/E $152.30 (Mine was 70c @ $37 on 9/12/07)
    • In The Money (ITM)
      • $110 Call $47.80 Premium = $4780 B/E $157.80
    • At The Money (ATM)
      • $120 Call $43.60 Premium = $4360 B/E $163.60
    • Out of The Money (OTM)
      • $130 Call $39.80 Premium = $3980 B/E $169.80
  • Straight Purchase vs LEAPS Purchase
    • Investment Diff = $7154
rimm research in motion
RIMM – Research In Motion
  • Straight Purchase
    • $104.75 for 100 Shares = $10475
  • LEAPS Purchase January 2010 (Exp 774)
  • Deep In The Money vs Out of The Money
    • Deep In The Money
      • $90 Call $45.85 Premium = $4585 B/E $135.85 (Mine was 70c @ $33.40 on 9/12/07)
    • In The Money (ITM)
      • $100 Call $42.05 Premium = $4205 B/E $142.05
    • At The Money (ATM)
      • $105 Call $40.30 Premium = $4030 B/E $145.30
    • Out of The Money (OTM)
      • $110 Call $38.60 Premium = $3860 B/E $148.60
    • Investment Diff = $725 / B/E Diff = $12.75
  • Straight Purchase vs LEAPS Purchase
    • Investment Diff = $5890
gg gold corp 12 3 07
GG – Gold Corp 12/3 07
  • Straight Purchase
    • $32.58 for 100 Shares = $3258
  • LEAPS Purchase January 2010 (Exp 774)
  • Deep In The Money vs Out of The Money
    • Deep In The Money
      • $20 Call $15.80 Premium = $1580 B/E $35.80 (Mine was 20c @ $11.30 on 9/12/07)
    • In The Money (ITM)
      • $30 Call $10.40 Premium = $1040 B/E $40.40
    • At The Money (ATM)
      • $35 Call $8.40 Premium = $840 B/E $43.40
    • Out of The Money (OTM)
      • $40 Call $6.70 Premium = $3860 B/E $46.70
    • Investment Diff = $2280 / B/E Diff = $10.90
  • Straight Purchase vs LEAPS Purchase
    • Investment Diff = $1678
split strategy
Split Strategy
  • Check News for Split Calendar
  • Monitor Strong Stocks That Are Nearing Split
  • Use Investools Split Analysis (Basic Stocks)
  • As a General Rule the LEAPS Split Strategy is Best for a 2 for 1 Split
  • Historically a Stock Will Achieve Its Prior Split Value in 24 Months Time
  • Purchase LEAPS Shortly After Post Split Depression
sell current month call
Sell Current Month Call
  • Another Way to Increase Account Value
  • Similar to Stock Covered Call
  • Allows For Partial to Full Recouping of Original Premium for LEAPS
  • Want to Sell as Far Out of The Money as Possible to Preserve Original LEAPS
  • Want to Expire Worthless to Keep Premium
  • Examples: POT, RIMM, GG
pot 12 3 07
POT 12/3/07
  • POT Trading @ $123.84
    • Dec 145 @ $1.10
    • Dec 140 @ $1.67
    • Dec 135 @ $2.60
    • Dec 130 @ $4.05
    • Dec 125 @ $5.95
rimm 12 3 07
RIMM 12/3/07
  • RIMM Trading @ $104.75
    • Dec 130 @ $1.77
    • Dec 120 @ $3.48
    • Dec 115 @ $4.72
    • Dec 110 @ $6.35
    • Dec 105 @ $8.47
gg 12 3 07
GG 12/3/07
  • GG Trading @ $32.58
    • Dec 40 @ $.07
    • Dec 37.5 @ $.20
    • Dec 35 @ $.58
more examples
More Examples
  • My Personal Account 12/3/07
    • POT
      • 9/12/07 70c @ 37, Mark 67.55 Profit $3055
      • Investment = $3700 Return = 82.57%/3 = 27.52% Monthly or 330.28% Annually
      • If Straight Purchase on 9/12/07 @ $89.00, Current Close Price $123.84 = $3484 Gain, Return = 39.15%/3 = 13.05% Monthly or 156.6% Annually
more examples1
More Examples
  • My Personal Account 12/3/07
    • RIMM
      • 9/12/07 70c @ 33.40, Mark 54.475 Profit $2107.50
      • Investment = $3340 Return = 61.31%/3 = 20.44% Monthly or 245.25% Annually
      • If Straight Purchase on 9/12/07 @ $85.00, Current Close Price $104.75 = $1975 Gain, Return = 23.24%/3 = 7.75% Monthly or 92.9% Annually
more examples2
More Examples
  • My Personal Account 12/3/07
    • GG
      • 9/12/07 70c @ 11.30, Mark 15.60 Profit $430
      • Investment = $1130 Return = 38.05%/3 = 12.68% Monthly or 152.2% Annually
      • If Straight Purchase on 9/12/07 @ $27.00, Current Close Price $32.58 = $558 Gain, Return = 20.67%/3 = 6.89% Monthly or 82.67% Annually
i am sold on leaps
I Am Sold on LEAPS
  • More Conservative Approach
  • Excellent Tool for IRA, IRRA, 401k
  • Q & A
  • Comments