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Hi All,
I've been thinking about where I could add value for users in addition to selling options on a weekly basis (which we've been crushing)! A lot of what I do is based upon finding stocks that I believe are undervalued in the market. If our research is correct and a stock truly is undervalued then we have a risk/reward profile that is in our favor. What if we could take that risk reward profile and use it in our favor in a more aggressive but strategic way. This is where LEAP options could come in. Let me explain:
Leap options, also known as Long-Term Equity Anticipation Securities, are a type of financial derivative contract that grants investors the right, but not the obligation, to buy or sell an underlying asset, typically a stock, at a predetermined price (strike price) on or before a specific future date (expiration date). What sets leap options apart is their extended expiration timeline, usually ranging from nine months to several years.
The rewards of leap options stem from their longer timeframe, allowing investors to potentially benefit from significant price movements in the underlying asset. They offer exposure to market trends without requiring a substantial upfront investment. Moreover, they can serve as a strategic tool for portfolio diversification and risk management.
However, leap options also come with inherent risks. Their extended duration means that market conditions and company fundamentals could change significantly during the holding period, leading to unexpected outcomes. Due to the prolonged nature of these options, their value can be more sensitive to factors like changes in interest rates and market volatility. Moreover, if the anticipated price movements don't materialize, investors risk losing their initial investment, as leap options can expire worthless.
In essence, leap options provide traders and investors with a unique way to speculate on long-term market trends and manage risk, but their success hinges on accurately predicting price movements within an extended timeframe, making them a sophisticated instrument best suited for those with a comprehensive understanding of options and market dynamics.
So to put it in simple terms: I plan to strategically purchase some long dated calls (2025 expirations) on stocks that I feel are way to cheap and have been beat up due to the current market environment. If we are correct it could lead to massive outsized returns. Being incorrect could lead to the loss of every dollar dedicated to the strategy. Please, only invest what you would be willing to lose. Now... let me get to what I actually view as a huge opportunity for the next year or so.
I will be purchasing LEAPs on Riot Blockchain (RIOT) for 1/17/2025 - $22 Strike - current price is $3.01.
RIOT is a bitcoin miner that is very cyclical in nature along with bitcoin. It has an all time high of $71 per share in 2021. It currently trades at $10.60 per share and was as high as $20 per share in mid July. I believe that this massive sell off in a month's time is a perfect time to buy LEAPs. This gives me a year and a half for the stock price to go back up in value. The contract that I'm selecting ($22 strike 1/17/2025) traded for nearly triple in value back in july at over $9.00 per contract. I like the risk/reward here of making some good money on this particular contract. Remember, buying options can lead to total loss. You don't want to risk anything you can't afford to lose. These plays can often take some time to play out as well which is why I've selected a contract that has nearly 18 months until expiration.
I'm happy to answer what questions you have in the chat!
Also, If you aren't a member be sure to check out OPG and consider joining! We are the place to be for options education and action!
-Caleb
