Why Options LEAPS Trading is a Great Long-Term Investment OpportunityJul 07, 2023
Are you tired of watching your savings sit stagnant in a low-yield savings account? Are you ready to take control of your financial future and invest in the stock market? If so, you're in the right place.
Investing essentially involves purchasing assets that are likely to increase in value over time. One of the most popular investment vehicles is stocks, which represent ownership in a company. However, there are other investment options that can offer even more potential for profit, such as options trading.
Understanding Options LEAPS Trading
Options trading is an agreement between two parties, where the buyer has the right to purchase or sell a stock at a fixed price and date, without an obligation to do so. Long-term Equity Anticipation Securities, also known as LEAPS, are options contracts that last for more than a year, providing investors with an extended opportunity to buy or sell a stock at a predetermined price.
LEAPS options are available for a wide range of underlying assets, including stocks, indexes, and exchange-traded funds (ETFs). They can be used for a variety of trading strategies, including buying and holding a call or put option to profit from a long-term trend, using options to hedge an existing position or selling options to generate income.
LEAPS Options vs Short-Term Options
LEAPS options and short-term options have distinct differences. Firstly, LEAPS options have a longer expiration date than short-term options, typically lasting one year or more. Secondly, LEAPS options come with a higher premium compared to short-term options, as the former offers a longer time horizon.
Moreover, LEAPS options have less time decay compared to short-term options. This characteristic enables LEAPS options to retain their value better over time, as the value may not erode as quickly. These differences make LEAPS options unique, and it is essential for investors to understand them before making trading decisions.
Why Trade Options LEAPS?
LEAPS options trading offers several advantages for investors, including:
- Long-term investment opportunity: LEAPS options allow investors to plan for long-term investment goals, such as retirement or college tuition for their children.
- Limited risk: Investors can limit their risk by purchasing options contracts instead of buying or selling stocks directly.
- Flexibility: LEAPS options contracts can be bought or sold at any time before expiration, providing investors with the flexibility to adjust their positions based on market conditions.
- Lower cost: LEAPS options contracts are less expensive than traditional options contracts, making them accessible to a wider range of investors.
Options LEAPS trading offers investors a flexible and long-term investment opportunity with limited risk. By using the right strategies, investors can achieve their long-term investment goals and manage their risk effectively.
If you are interested in learning more about options LEAPS trading, consider enrolling in MoneySkool's Options LEAPS Trading for Beginners course. Our course provides comprehensive training and hands-on experience to help you become a successful options trader. Good luck on your investment journey!