I receive a few comments when I share that I bought LEAPS contract with a low Delta. Some readers think that I do not understand options trading and that buying a LEAPS contract at a lower delta has an extremely low chance of being successful (at reaching the strike price).
However, in a LEAPS contract, you do not need to hit the strike price in order to earn profits. A lower delta may translate to a high strike price which may not be reached eventually. However, we can gain profits as long as the share price rises above our purchased price.
On 22 Oct 21, I share in this article that I bought an Alphabet LEAPS with a strike price of $3500 and a Delta of 0.169. I paid a premium of $47.85 or $4785 for the whole contract. Alphabet’s (GOOG) share price was $2848.
See Article: How I Use LEAPS To 10X My Returns
On today (28 Oct 21), Alphabet’s share price is currently trading at $2953 after a strong earning result yesterday. The premium has increased to $7500, a 56.7% increase from the premium I paid at $4785. The share price on the other hand increased by 3.69% from $2848 to $2953. The current share price is nowhere near my strike price of $3500.
Let me share another example.
On 15 Oct 21, I bought a Tesla LEAP Contract and details are as follow:
Type of Option: LEAPS Call
Date of Expiration: 20 Jan 2023 (461 days to expiration)
Strike price: $1500
Premium Price: $37.50
Share price of Tesla on 15 Oct 21: $839.70
On 26 Oct 21, the LEAPS contract is now $1018, the LEAPS contract is worth around $87, which is a 132% profits and Tesla share price is nowhere near the strike price of $1500.
From these 2 examples, you can understand 2 points:
1) You do not need to wait until the share price to reach the strike price to make profits
2) LEAPS magnify your returns in a bullish uptrend, a 21.2% increase in share price translate to 132% returns in the premium price for my Tesla LEAPS and a 56.7% increase in premium for a 3.69% increase in share price for Alphabet (Google).
I hope this article is useful to you in some ways and please do check out the below articles for LEAPS strategies and how I made massive profits by using these strategies for the past year.
[Proof Of Concept] Why LEAPS Options With Low Delta Works
How Does LEAPS Works And How I Use LEAPS To Maximise Gains?
Why I Buy LEAPS With A Low Delta?
My Biggest LEAPS Options Contract Closed, 173.8% Returns In 10 Days
The Power Of LEAPS: Tesla LEAPS Is Up 340% In Just 18 Days
Thank You Tesla & Elon Musk For The 470% Profits
Understanding How CALL Option Works
Keen to learn about options trading but do not wish to pay for expensive courses, this newbie guide will help gain the knowledge and fundamentals to understand options better. And it’s totally free!
The Newbie’s Guide To Options Trading
The LEAPS Strategy has helped me make more than USD120,000 in 2021. Here’s all you need to know about this strategy that can help you increase your wealth exponentially:
The Ultimate LEAPS Options Thread
Looking for ideas on what stocks to invest in or which stocks to trade? You can take reference from what I have been buying or selling. I try to update them as soon as I can in this section, as well as share my thoughts behind executing these trades:
Excited to start your trading journey or perhaps try out with a paper trading account to build your confidence in trading? Check out this step-by-step to help you get started:
How To Buy Options on Interactive Brokers (Step-By-Step)
I watched tons of videos on YouTube since 2020 and if you are wondering if there are any useful channels that you can subscribe to for learning market trends, TA, FA, check out this compilation here:
My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day
I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
1st Year Options Trading Recap: The Journey Towards SGD$217,509 Profits In 2021
This blog is as authentic and as transparent as I can share, I do not just show the wins and hide the loss. I have made some very bad decisions in the first 8 years of investing and paid a huge price for them. Here is the loss I have accumulated during these years. I hope you learn some lessons from my mistakes.
I Cut $135,715 Worth Of Losses In The Last 1.5 Months