LEAPS Option Strategies

Welcome to the LEAPS Option Strategies page from Great Option Trading Strategies. This page includes resources for LEAPS option and calendar spread traders and investors.



Resources and Articles for LEAPS-Based Option Traders and Investors

All About LEAPS - LEAPS, or Long Term Equity AnticiPation Securities, are really no different than regular options with the exception of having a much longer expiration horizon. This page provides a quick introduction to and overview of LEAPS and LEAPS strategies.

What Are LEAPS Calendar Spreads? What are LEAPS Calendar or Time Spreads and why should you care? Here we take a look at the rationale for LEAPS based calendar spreads and examine the two big structural advantages build into the trade.

What's the Difference Between a Calendar Spread and a Diagonal Spread? - Calendar spreads, time spreads, horizontal spreads, diagonal spreads - yikes! What's the difference among all these anyway, and how critical is it to be able to articulate the differences? It's super important - if you've decided to publish your own option trading encyclopedia. In this article, we take a look at the bigger picture and try not to get too hung up on terminology.

(Part 1) What is the LEAPS Perpetual Income Strategy? - In this article, I introduce and spell out the LEAPS-based Perpetual Income Strategy. What if we could engineer a strategy where it doesn't matter where the underlying stock trades, whether we're in a bear market or bull market, we never have to worry about trying to predict the future, and we can still spin off a lot of income (real income, not just cash premium at the expense of capital losses somewhere else)?

(Part 2) Constructing the LEAPS Perpetual Income Strategy - In this article, I detail the long LEAPS construction of the trade and show how the offsetting LEAPS eliminate the impact that the fluctuating share price has on the position's total intrinsic value (and why that's key).

(Part 3) Managing the LEAPS Perpetual Income Strategy - So if the long portion of the trade can't gain or lose intrinsic value, how do we actually make money here?

(Part 4) Measuring the LEAPS Perpetual Income Strategy - I had a total a-ha! moment here. When you employ what I call the "Profitability Spread" you'll not only precisely how well the trade is performing (and exactly how profitable it is), but you'll also gain a deeper understanding about how and why this thing works so well.

(Part 5) Pros and Cons of the LEAPS Perpetual Income Strategy - Too good to be true? How about an objective look at the advantages and disadvantages of the LEAPS Perpetual Income Strategy?

(Part 6) LEAPS Perpetual Income Strategy Examples - PYPL - So how does this all weather, high yield, low risk, low maintenance strategy perform in the real world? See for yourself with these two documented trades employing the LEAPS Perpetual Income Strategy.


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How to Generate Option Income and Still Lose Money



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Warren Buffett Zero Cost Basis Portfolio Current Equity Holdings:

KO - 125 shares
KMI - 100 shares
BP - 100 shares
MCD - 30 shares
JNJ - 25 shares
GIS - 25 shares
PAYX - 25 shares

Open Market Purchase Price: $20,071.83

Less Booked Option Income: $16,341.71

Tot. Discount: 81.42%
Adj. Div. Yield: 19.59%

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