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LEAPS Options: Learn With Perosi How To Make Multiple “Stocks” With Options

The investment moves of the “Congress Hill” Pelosi have always been the focus of market attention.

This year, she chose a major bull stock in the AI industry for the first time$Palo Alto Networks (PANW.US)$。

According to the latest disclosure, Perosi purchased PANW bullish options 2 times in a row in February.

Line option price is$200, the expiration date is17 January 2025。 Total option payout is estimated to beBetween $60,000 and $125 million.

PANW surged 7% overnight after the news broke.

It's not the first time she's done it, and as early as three months ago, Perosi had a hand in it.$NVIDIA (NVDA.US)$LEAPS BULLISH OPTION.

Over the next few months, Indias rose,

Perosi earned a fortune.

1. What exactly did Perosi buy?

Let's take a closer look at the actions of Perosi, the expiration date of the option is January 17, 2025.

Well, it's been a year later, how can I buy options so far away?

The options are priced at $200, while PANW's current share price is well over $200.

Well, why buy options that are so deeply priced?

As you know, the longer the expiration date of options, the more expensive the option gold, the higher the price of options, the more expensive the option gold.

Why would Perosi choose such an investment approach?

Next, let Asir take you all to dismantle it one by one!

Second, what are LEAPS options?

This operation, by Perosi, is actually a strategy of leveraging options leverage to do multiple stocks:

LEAPS (Long-Term Equity Anticipation Securities) is a long-term option.

Simply put, it's an alternative to option leverage as a holding。 IF YOU CONTROL YOUR POSITION WELL, LEAPS CAN YIELD HIGHER THAN HOLDING SHARES AND LEAPS RISK LOWER THAN DIRECT HOLDINGS.

The term of ordinary options usually does not exceed 1 year, while LEAPS are usually more than 1 year.Although the definition is so said, it is still relatively flexible to use, in fact the 10 month, 11 month, and 14 month options are also applicable.

LEAPS, WHICH ARE USUALLY AMERICAN OPTIONS, CAN BE CLOSED BEFORE THE EXPIRATION DATE.Some stocks, indices, and ETFs have LEAPS, but not all.

We have opened the Futubull App options page,Swipe left and drag the expiration date above to filter.

Has an interesting phenomenon been observed:MOST LEAPS OPTIONS ON THE MARKET EXPIRE IN JANUARY OF EACH YEAR.

Third, the type of LEAPS options, trading rules:

COMPARED TO OTHER OPTIONS WITH SHORTER MATURITY DATES, LEAPS ALSO HAVE TWO TYPES OF BEARISH OPTIONS AND BULLISH OPTIONS.

Important contract elements and trading rules are not fundamentally different either.

Here, sir does not go into detail, and would like to learn more about options:

Click here to learn the course:Learn to earn more than a barrel with options techniques

Fourth, Perosi's case analysis of buying PANW bullish LEAPS options:

As an example of our strategy, we look forward to the February 12 and February 21 issues of the following order. Via the Futubull appHistorical transaction information backtrackingand then the speculation estimates that at this time, the average buy price of the option is about $178, and the average buy price of the common stock during this time is about $325.

Risk Disclosure: The average purchase price of the option and the average purchase price of the main stock are simple estimates based on two-day quotes and do not represent real data at the time of placing an order.

HER 70 HAND LEAPS OPTIONS,Approximately 7,000 shares of common stock were tracked, but only invested about $60-125 million.

During that time, PANW's average share price was about $325,Assuming she buys all of the major stocks with $60-125 million, she can track only about 1800-3800 ordinary shares.

LEAPS STRATEGY HAS A LOWER INITIAL INVESTMENT COST AND HIGHER CAPITAL UTILIZATION. Then with a near profit amount, the rate of return on capital is relatively high.

At the same time, the risk is relatively manageable.Even if the stock price falls sharply in the worst case, her options return to zero, and the overall loss will be much less than if she bought the stock directly in full.

5. PEROSI BOUGHT PANW BULLISH LEAPS OPTIONS PROFIT AND LOSS ANALYSIS:

One is a rise in stock prices.

IF THE STOCK PRICE RISES SIGNIFICANTLY, LEAPS OPTION RETURNS MAY DOUBLE MORE THAN DIRECTLY BUYING STOCKS.

From the point of view of governance, the LEAPS strategy can buy a positive stock at a price of $200 a share, plus an option purchase cost of $178/share, for a total cost of about $378/share, although it is slightly more expensive than it was then to buy a positive share directly. (Note: The data referenced here are simple estimates based on historical transactions and cannot represent actual data for that transaction.)

But the more the share price rises, the more profits are, the easier it is to overlook this part of the higher cost.

Also, let's not forget that most investors in the market choose the way to close.

The LEAPS strategy, in addition to the intrinsic value brought by the line, is slower to lose external value over time, and has more external value if the implied volatility is high.

So in actual operation, the closing yield of a LEAPS strategy is usually higher than that of a hedge.

One is a drop in stock prices.

IF THE STOCK PRICE FALLS, OF COURSE, IT'S WHERE LEVERAGE IS HERE, LEAPS WILL HAVE A BIGGER LOSS MARGIN THAN STOCKS.

So, the prerequisite for adopting this strategy is that you have strong confidence in the right stock movement.

There is also a situation where the stock price does not change much.

If the stock price does not change much, losses over time may offset some of the gains and may face some losses.

However, the LEAPS strategy limits the maximum losses in the event of a stock price decline, although in some cases it undermines certain gains or increases certain losses (but this is within a manageable range), and to some extent adapts to a longer period of return after buying a positive stock.

ALL IN ALL, LEAPS OPTIONS ARE A GREAT OPTION FOR THOSE INVESTORS WHO LOOK AT THE LONG-TERM VALUE OF A STOCK BUT ARE NOT WILLING TO SPEND A LOT OF MONEY FOR A LONG TIME.

Whether as an alternative to direct shareholding, or for speculation or arbitrage, LEAPS options have their unique advantages.

6. What should you pay attention to when choosing LEAPS options strategy?

OF COURSE, BEFORE ANY TRADE, BE MINDFUL OF THE RISKS, PROVIDED THAT YOU CHOOSE LEAPS OPTIONS:

a. firm bullish and confident that positive stocks will rise.

b. Take control of the risk and keep a certain margin.

So you see, PANW surged 7% overnight after the news of the Pelosi holding position came out.

That's what shareholders think.

: PELOSI IS SO BULLISH PANW, SO LET'S NOT RELAX TOO, GO AHEAD!

Also, pay special attention to some differences:

a. Order Type:

LEAPS typically have less liquidity than short term options, so try to avoid direct market quotes as much as possible when trading. We can use the middle price or test several times with different prices to find the best offer.

Click here to learn more:Option order type? Additional order? How to use it anyway!

b. Focus on risk-free interest rates:

For short-term options, changes in Rho can be ignored. AND FOR LEAPS OPTIONS, IT IS IMPORTANT TO PAY ATTENTION TO RISK-FREE CHANGES IN INTEREST RATES, AND YOU CAN PAY MORE ATTENTION TO MACRO INFORMATION BEFORE APPLYING A STRATEGY.

7. Summary of this article

Finally, summarize today's knowledge points.

LEAPS are a long-term option with a maturity of more than 1 year.

Unlike shorter-term options, they tend to be more expensive, their external value depreciates more slowly over time, and the impact of short-term fluctuations in a price-targeted asset is less. At the same time, its liquidity is usually lower and spreads are larger.

THE MAIN USE CASE FOR LEAPS IS LONG-TERM TRACKING WITH BUY SUBSCRIPTION LEAPS INSTEAD OF BUYING POSITIVE STOCKS.

It limits maximum losses and higher capital utilization helps to improve return on capital, diversify assets, cope with emergencies, and so on, but in some cases it is less like buying a positive stock. When choosing LEAPS, consider factors such as delta, option price, and liquidity.

LEAPS can also be used for hedging, increasing income, etc., but they also carry the same risks.

SOME INVESTORS WILL DIVERSIFY THEIR INVESTMENT INTO SEVERAL STOCKS THAT LOOK GOOD THROUGH MULTIPLE BULLISH LEAPS;

OR TO RESERVE SOME CAPITAL TO INVEST IN OTHER ASSETS IN LIEU OF LEAPS, OR IN RESPONSE TO EMERGENCIES;

There are also investors who roll over LEAPS to keep a long-term track of the stocks, which of course comes at a cost;

SOME INVESTORS ALSO USE LEAPS TO TRACK GOOD INDICES OVER THE LONG TERM.

Okay, the above is today's share, and welcome all you cow friends to forward three series with one click. Having said that, what do you think of LEAPS? Welcome to share in the comments area.

Finally, Futu will be heldThe first major investment exhibition in Hong Kong! The exhibition includes a professional investment strategy session, a KOL exchange event, and 10,000 beautiful ceremonies will be held on the spot! Quota is limited! Come and click to sign up~

Time: March 8-9, 2024

Venue: Hall 5G, Hong Kong Convention and Exhibition Centre

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