{"id":15645,"date":"2025-07-17T14:19:47","date_gmt":"2025-07-17T18:19:47","guid":{"rendered":"https:\/\/www.mainstbeatswallst.com\/?page_id=15645"},"modified":"2025-07-17T14:26:35","modified_gmt":"2025-07-17T18:26:35","slug":"why-i-like-leaps-as-a-stock-alternative","status":"publish","type":"page","link":"https:\/\/www.mainstbeatswallst.com\/?page_id=15645","title":{"rendered":"Why I Like LEAPS as a Stock Alternative"},"content":{"rendered":"

Stock vs. LEAPS: A Real Example with NVDA<\/strong><\/h3>\n

Earlier this week, I said I\u2019d write a post explaining the difference between owning stock and the alternative\u2014owning LEAPS options. So here it is.<\/p>\n

Before we dive in, it\u2019s important to remember that I\u2019m a trader, not a buy-and-hold guy. I have nothing against buying and holding stock\u2014I do it with some positions\u2014and many investors have become millionaires simply by investing in stocks. Ultimately, we all find our preferred method and just try not to make too many mistakes along the way.<\/p>\n

Now, before I explain why I often prefer LEAPS options over buying stock, let\u2019s quickly define a few key terms: LEAPS options<\/strong>, stock alternatives<\/strong>, Delta<\/strong>, and Return on Investment (ROI).<\/strong><\/p>\n

\n

What Are LEAPS?<\/strong><\/h3>\n

LEAPS (Long-term Equity Anticipation Securities) are just like regular monthly or weekly options, except their expiration dates are more than one year out\u2014up to three years. LEAPS give investors different ways to trade, hedge, or invest in the market over a longer time frame than standard options.<\/p>\n

\n

Stock Alternative<\/strong><\/h3>\n

When I want long-term exposure to a stock, I often choose to buy LEAPS instead of the stock itself. By purchasing LEAPS call options, investors can profit from a stock\u2019s price increase while committing far less capital than buying 100 shares outright.<\/p>\n

If the stock price rises above the LEAPS strike price, the holder can either exercise the option to buy shares below market value or simply sell the LEAPS in the open market for a profit.<\/p>\n

\n

Delta<\/strong><\/h3>\n

Whether you\u2019re a beginner or already a seasoned options trader, you may have heard about the \u201cGreeks\u201d but you may not know exactly what they are or what they can do for you. If so, read my page that explains what these \u201cGreeks\u201d<\/a> <\/span>mean and how to use them to better understand the price of an option.<\/p>\n

If you\u2019ve heard about \u201cthe Greeks\u201d in options trading, Delta is usually the first one to understand.<\/p>\n

Delta<\/strong> measures how much an option\u2019s price is expected to change for every $1 move in the underlying stock. For example, a Delta of 0.40 means the option should gain about 40\u00a2 for every $1 the stock increases ($40 with 100 shares).<\/p>\n

Delta is very important to me when buying LEAPS. If I own 100 shares of stock and it goes up by $1, my position gains $100. But if I buy 1 LEAPS contract instead (which controls 100 shares), Delta tells me how much the option will increase with each $1 move in the stock.<\/p>\n

\n

Return on Investment (ROI)<\/strong><\/h3>\n

ROI<\/strong> measures how profitable an investment is. It tells you how much you\u2019ve earned (or lost) compared to what you invested.<\/p>\n

\n

A Real Example: Nvidia (NVDA)<\/strong><\/h3>\n

Now that we\u2019ve defined the key terms, let\u2019s walk through a real trade from May 27, 2025<\/strong>, when Nvidia (NVDA) was trading at $135<\/strong> per share.<\/p>\n

Investor 1<\/strong>: Buys 100 Shares of NVDA<\/h4>\n
    \n
  • \n

    Date: 5\/27\/25<\/p>\n<\/li>\n

  • \n

    Buy 100 shares @ $135<\/p>\n<\/li>\n

  • \n

    Total Invested: $13,500<\/strong><\/p>\n<\/li>\n

  • \n

    Position Value Increase<\/strong>: $100 for every $1 increase in stock price<\/p>\n<\/li>\n<\/ul>\n

    Investor 2<\/strong> (me): Buys 2 LEAPS Contracts<\/h4>\n
      \n
    • \n

      Date: 5\/27\/25<\/p>\n<\/li>\n

    • \n

      Buy 2 NVDA 1\/15\/27 $150 Calls @ $35.85<\/p>\n<\/li>\n

    • \n

      Delta: 0.66<\/strong><\/p>\n<\/li>\n

    • \n

      Total Invested<\/strong>: $7,170 (2 contracts \u00d7 $3,585)<\/p>\n<\/li>\n

    • \n

      Position Value Increase<\/strong>: $132 for every $1 increase in stock price (0.66 \u00d7 200 shares)<\/p>\n<\/li>\n<\/ul>\n

      I bought 2 contracts instead of 1 so that my Delta exposure would be closer (or more) to owning 100 shares. Each LEAPS contract cost $3,585 (100 \u00d7 35.85), so two contracts cost $7,170. With a Delta of 0.66, my position gains about $132 for every $1 the stock rises\u2014compared to $100 if I owned the shares outright.<\/p>\n

      \n

      Fast Forward to Today<\/strong><\/h3>\n

      As I write this, NVDA is trading at $174<\/strong>. That\u2019s a $39<\/strong> gain per share since May 27.<\/p>\n

      Investor 1<\/strong>:<\/h4>\n
        \n
      • \n

        Stock gain: $39 \u00d7 100 shares = $3,900<\/strong><\/p>\n<\/li>\n

      • \n

        ROI: $3,900 \u00f7 $13,500 = 28.9%<\/strong><\/p>\n<\/li>\n<\/ul>\n

        Investor 2<\/strong>:<\/h4>\n
          \n
        • \n

          Current LEAPS price: $60.80<\/strong><\/p>\n<\/li>\n

        • \n

          Gain per contract: $60.80 \u2013 $35.85 = $24.75<\/strong><\/p>\n<\/li>\n

        • \n

          Total gain: $24.95 \u00d7 200 shares = $4,990<\/strong><\/p>\n<\/li>\n

        • \n

          ROI: $4,990 \u00f7 $7,170 = 69.6%<\/strong><\/p>\n<\/li>\n<\/ul>\n

          \n

          Final Thoughts<\/strong><\/h3>\n

          Investor 2 (me) invested less capital, made more money, and had a significantly higher ROI. This is why, as a trader, I often choose LEAPS over buying stock. The leverage, combined with long-term exposure and strategic Delta positioning, can offer a better return\u2014if the trade works in your favor.<\/p>\n

          I hope this short explanation makes it clear why I like LEAPS. If you have any questions please send me a message.<\/p>\n

          \ud83d\udcc8Successful trading,<\/p>\n

          Steve<\/p>\n

          The Options Coach<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

          Stock vs. LEAPS: A Real Example with NVDA Earlier this week, I said I\u2019d write a post explaining the difference between owning stock and the alternative\u2014owning LEAPS options. So here it is. Before we dive in, it\u2019s important to remember that I\u2019m a trader, not a buy-and-hold guy. I have nothing against buying and holding […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-15645","page","type-page","status-publish","hentry"],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/P75MP0-44l","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/15645","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15645"}],"version-history":[{"count":4,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/15645\/revisions"}],"predecessor-version":[{"id":15649,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/15645\/revisions\/15649"}],"wp:attachment":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15645"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}