Pros and Cons of the LEAPS Perpetual Income Strategy

The customized and very unique LEAPS Perpetual Income Strategy is the customized LEAPS based income strategy that I teach and demonstrate inside The Leveraged Investing Club that I developed is one of my favorite strategies.

(You can also learn more about the construction, management, and measurement of the strategy.)

The strategy itself is designed to:

  • Consistently generate high yield income
  • Work in every market environment and regardless of where the underlying share price trades
  • Be low stress and low maintenance

Sounds a little too good to be true?

Surely there must be some drawbacks, right?

In this article we'll take an objective look at the pros and cons of the LEAPS Perpetual Income Strategy.

The Pros of the LEAPS Perpetual Income Strategy

The LEAPS Perpetual Income Strategy is ambitious - and, in my view, profound:

>> It should always make money - bull market, bear market, flat market, whatever

>> The underlying share price - and where it trades or in what direction - doesn't matter

>> We don't have to do a lot of research, study charts, or need to correctly guess the future

>> Once you really understand the strategy, there should be absolutely no stress involved in monitoring or managing it

>> It should always generate true high yield income (not fake "income" that masks big capital losses elsewhere on the trade)

>> It's a relatively low maintenance strategy

>> It's also easy to track, determine, and precisely gauge the profitability and performance of the trade at any point in time

Cons of the LEAPS Perpetual Income Strategy

So what are the potential drawbacks of the LEAPS Perpetual Income Strategy?

Here's how I see them:

>> This is likely not a beginner's strategy (I recommend Leveraged Investing Club members have experience with our customized put writing Sleep at Night High Yield Option Income Strategy (where we have very specific set up and trade management processes in place)

>> You have to be willing to tie up your capital for longer periods of time (while the LEAPS Perpetual Income Strategy generates fresh income on a bi-weekly or monthly basis, you should be prepared to commit your primary capital base for the trade for a year or two - and sometimes even longer)

>> As a result, this would not be considered a highly liquid strategy (and unwinding the trade may not be the most efficient of processes)

>> The income produced by the strategy will be erratic and uneven at times - the strategy produces high yield income but not with annuity-like certainty as to the amount or the precise timing

>> Some portion of your near dated short options - either the calls or the puts - will likely always be in the money/underwater (unless or until you're comfortable and experienced with our trade management and trade repair process, this could be disconcerting at first)

Next we'll take a look at a couple of LEAPS Perpetual Income Trades on PYPL and see what this looks like in the real world.

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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%