Today’s episode - LEAPS: Your Ticket to Long-Term Stock Plays (Without Breaking the Bank)

• Please support our sponsor. They provide valuable information for you and me. 

• If you enjoy this newsletter, please consider sharing it with your friends and business contacts by clicking the button below. ⬇️ 

  Share the newsletter

Good day! ✋ 

Have you ever dreamt of owning a piece of those high-flying stocks but balked at the price tag of 100 shares? Or perhaps you have a hunch about a stock's future but don't want to commit a hefty sum for an extended period? If so, LEAPS might be the hidden gem you've been looking for.

These long-term options offer a unique way to capture the upside of stocks without the full upfront cost. But like any investment, they come with their quirks and risks. In this issue, we'll break down the ins and outs of LEAPS, exploring their benefits, drawbacks, and how they stack up against traditional stock ownership. We'll even dive into some advanced strategies seasoned investors use to maximize their potential.

Before we dive in, why not check our IWA Portfolios?

Why upgrade to Premium for the IWA Portfolio?

Limited Trial Ongoing!

Smart investing isn't about reinventing the wheel but learning from those who've already found success.

The Investing Wise Academy Portfolios offer you more than just a list of stocks. They provide:

• Proven Strategies: Gain insights into the decision-making process behind our carefully curated stock selections. Understand why we choose certain stocks, how we balance risk and reward, and how we adapt to market changes.

• Long-Term Vision: Our focus on long-term investments means you'll get a portfolio built for sustainable growth, not short-term gains. Learn to cultivate patience and discipline, essential traits of successful investors.

• Diversification Made Easy: Whether you're interested in high-growth potential, steady dividends, or a blend of both, our three portfolios provide diversified options tailored to your risk appetite and investment goals.

• Daily Trades Access: Witness our strategies in action with daily trade updates.

Upgrading to Premium isn't just about accessing a portfolio. It's about gaining a proven roadmap to financial success. Learn from our experience, accelerate your investment journey, and build a portfolio that reflects your long-term goals.

Don't miss this opportunity. Sign up now and make informed investment decisions!

Trivia Corner - Test Your Knowledge & Win!

Ready to challenge your financial wits and potentially snag a reward?

• We've hidden a trivia answer somewhere within the ads in this newsletter!

How to Play:

• Carefully read the trivia question below.

• To get the answer, scroll down and click "Shop Now." The answer is embedded in today’s sponsor page.

• Once you've found it, reply to this email with your answer.

Today’s Trivia Question:

Prize:

• One lucky winner, chosen randomly from those who answer correctly, will receive a $15 gift certificate!

• You could earn as much as $100 gift certificates in a month.

Deadline:

• You have 72 hours from when this newsletter is sent to submit your answer.

Bonus:

• Everyone who participates will get a special shoutout (first name only) in our following newsletter!

Let's Get Started!

This cannabis startup pioneered “rapid onset” gummies

Most people prefer to smoke cannabis but that isn’t an option if you’re at work or in public.

That’s why we were so excited when we found out about Mood’s new Rapid Onset THC Gummies. They can take effect in as little as 5 minutes without the need for a lighter, lingering smells or any coughing.

Nobody will ever know you’re enjoying some THC.

We recommend you try them out because they offer a 100% money-back guarantee. And for a limited time, you can receive 20% off with code FIRST20.

Shop Now

We can't wait to see how many of you crack the code. Good luck, and happy hunting!

Note: You need to be a verified subscriber to be eligible

Now, go ahead to your path to Options Trading success.👇️ 

If you want to invest for the long term but find the cost of buying 100 shares of a stock prohibitive, or if you want to take a bullish position without tying up too much capital for too long, Long-Term Equity Anticipation Securities (LEAPS) might be a good solution. However, LEAPS come with risks and are best suited for experienced and financially stable investors. So, do more research and consider not just the rewards but also the risks.

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.

What Are LEAPS?

LEAPS stands for Long-Term Equity Anticipation Securities. These options typically expire over 12 months, although those with 10 to 11 months can qualify as LEAPS. LEAPS offers a longer horizon for potential gains or losses than regular options with shorter expiration periods.

• American-Style Options: LEAPS can be bought or sold on certain stocks, indexes, and ETFs before the expiration date.

• Higher Costs: LEAPS are generally more expensive than their shorter-dated counterparts due to their extended time frames.

• Slower Time Value Decay: LEAPS experience a slower time value decay rate than shorter-term options.

Note: Because of their longer duration, LEAPS are less affected by short-term fluctuations in the underlying asset’s price.

Key Characteristics of LEAPS

1. Price and Liquidity

   • Cost: LEAPS are more expensive due to their longer durations.

   • Liquidity: They often have lower liquidity, leading to wider bid-ask spreads. This means there’s a larger difference between the highest price buyers are willing to pay and the lowest price sellers will accept.

   • Trading Strategy: To avoid issues with liquidity, traders may need to be more patient. Consider placing bids based on the average of the bid and ask prices or testing different bids to secure a better fill price.

2. Delta and Its Implications

   • Delta measures how much the price of the option is expected to move when the underlying stock price changes. For instance, a delta of 0.8 means the option price moves $0.80 for every $1.00 move in the stock price.

   • Higher Delta: Options with a higher delta are more in-the-money and align more closely with the stock's price movements, but they are also more costly.

Comparing LEAPS to Direct Stock Purchases

Let's consider a hypothetical scenario where stock X is trading at $123.30.

• Buying the Stock Directly: To acquire 100 shares, you'd need $12,330.

• Purchasing a LEAPS Call: With a delta of 0.6403 and a strike price of $115, the cost of the LEAPS call is $23.375 per share. For 100 shares, this amounts to $2,337.50.

Advantages of LEAPS:

• Lower Initial Investment: The cost is significantly lower compared to buying the actual stock.

• Capital Efficiency: LEAPS require less initial capital, potentially allowing for higher returns on investment.

Scenario Analysis: Stock Price Movements

1. If the Stock Price Rises

   • Exercising the LEAPS Call: You can buy stock X at $115. Adding the $23.375 premium, your total cost per share is $138.375. If the stock price rises significantly, the higher initial cost might be outweighed by potential gains.

   • Alternative Strategy: Instead of exercising the option, you might close your position before expiration. This approach can often yield higher profits due to the time value of the LEAPS call, especially if implied volatility is high.

2. If the Stock Price Falls

   • Downside Protection: The maximum loss with LEAPS is limited to the premium paid, unlike owning the stock directly where losses could be substantial. For example, if stock X falls to $60, your loss with LEAPS is capped at $2,237.50, compared to a potential $6,330 loss with stock ownership.

   • Expiration Risk: If the LEAPS expire worthless, you could lose the entire premium. Conversely, holding the stock may allow you to wait for a potential rebound.

3. If the Stock Price Remains Stable

   • Time Value Decay: Initially, LEAPS experienced minimal time value decay. However, as expiration approaches, the time value diminishes more rapidly, potentially leading to losses as the option nears its expiry date.

   • Long Stock Advantage: Holding the stock avoids the issues of expiration and offers the possibility of earning dividends, which LEAPS do not provide.

Overall Comparison: LEAPS vs. Direct Stock Purchase

Pros of LEAPS:

• Limited Losses: Losses are capped at the premium paid.

• Lower Capital Requirement: Requires less initial investment, which can be beneficial for diversifying your portfolio or freeing up capital for other uses.

• Long-Term Exposure: Provides a way to benefit from long-term stock movements without buying the actual stock.

Cons of LEAPS:

• Expiration Risk: LEAPS have an expiration date, unlike stocks, which can be held indefinitely.

• Higher Costs: The premium for LEAPS is higher, and time decay accelerates as expiration nears.

• Missed Dividends: You won't receive dividends from LEAPS.

Additional Uses for LEAPS

• Hedging: LEAPS can hedge against downside risks in long stock positions, which is particularly useful in retirement portfolios.

• Income Enhancement: Selling LEAPS might enhance income or be combined with other options strategies.

• Rolling LEAPS: Some investors use a strategy called "Option Roll Forward," where they replace their LEAPS with new ones with later expiration dates, helping them track the underlying stock long-term.

LEAPS offers a unique way to gain long-term exposure to stock movements with a lower initial investment than purchasing shares directly. While they provide certain advantages, like limited loss and capital efficiency, they also come with risks, such as expiration and higher costs. Understanding these factors can help you decide if LEAPS fits your investment strategy.

That’s it for this episode. Watch out for more Options Trading and LEAPS follow-up content coming up soon! Make sure to subscribe, but if you want to capture in-depth learning about LEAPS and more, then consider our Premium membership.

You can check and follow the Options Trading series here.

Remember, investing is a journey, not a sprint. While August and September may present challenges, they're also rife with opportunities for those willing to do their homework. Keep your eyes on the horizon, stay informed, and never stop learning.

If you find this review helpful, you might also find our IWA portfolio useful. If you're interested in ETFs, take the first step towards a safer and more profitable investment journey by checking out our IWA portfolio today. ⬇️.

IWA PORTFOLIO

Staying invested, even during volatile times, is crucial. Patience and discipline are essential to maximize long-term gains and avoid impulsive decisions that could harm the portfolio.

Access our daily trades from the three portfolios we manage.

• IWA Quality Growth Stocks Portfolio

• IWA Quality ETF Portfolio

• IWA High Dividend Portfolio

The easy way to begin or enhance your investment journey is to learn from what works for others. This section is for you if you want inspiration from an existing investment portfolio.

The IWA Portfolio is only available to Premium Subscribers.

IWA Quality Growth Stocks Portfolio

Return YTD 19.82% ➡️ 20.52%

Return 2Y  81.26%

Profitable Weeks 54.39%

IWA Quality ETF Portfolio

It’s one of the newest portfolios, having just celebrated its first anniversary. We are pleased with its progress, as it's safe, reliable, and stable.

Return YTD 17.09% ➡️ 17.13%

Return 2Y 51.27%

Profitable Weeks 59.65%

IWA High Dividend Portfolio

I am immensely proud of my holdings, which have grown from a small investment into a strong portfolio of 40 reliable stocks spanning stable industries, focusing on quality dividend growth.

Return YTD 13.25% ➡️ 13.89%

Return 2Y 17.38%

Profitable Weeks 57.89%

Portfolio Indicated Dividend Yield 2.66%

Upgrade to Investing Wise Academy Premium to get hold of our stocks!

That’s it for this episode!

Thank you so much for reading today’s email! Your support is the only way I can write this email for free daily.

Kindly give us feedback in the poll below and share the newsletter with other investors if you find it valuable!

Remember: Investing is a journey, not a destination. It's about making informed decisions, managing risk, and staying committed to your long-term goals. So, take the time to research, experiment, and find the perfect recipe for your balanced portfolio.

Cheers to wealth, wisdom, and a dash of madness!

The Investing Wise Academy Team

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.

Limited Offer!

What is Alpha Picks?

Two data-driven stock picks each month to hold long-term

Access to all Alpha Picks (over 20 stocks) on day 1

The stock picks cover multiple sectors

The performance to date has significantly outperformed the S&P 50