{"id":7879,"date":"2020-06-18T12:56:12","date_gmt":"2020-06-18T16:56:12","guid":{"rendered":"http:\/\/www.mainstbeatswallst.com\/?page_id=7879"},"modified":"2020-06-18T13:02:34","modified_gmt":"2020-06-18T17:02:34","slug":"a-real-leaps-lesson-using-facebook","status":"publish","type":"page","link":"https:\/\/www.mainstbeatswallst.com\/?page_id=7879","title":{"rendered":"A Real LEAPS Lesson Using Facebook"},"content":{"rendered":"

First, I would like to welcome our new readers.<\/p>\n

Most readers know I do not buy short term options. You can do that strategy but I guarantee you will lose money. Always remember, 80% of options bought expire worthless. I would rather sell options!<\/p>\n

Every once in a while I’ll get a call from a friend telling me their son, maybe 20 years old, made $3000 this week in the market. I tell them, “your son is buying short term options. Tell him to stop or he’ll lose his money.” Buying options is for seasoned investors. It seems to me more and more young people are buying options because there are no sports to bet on. They need action!<\/strong> The bottom line is what they are doing is no different than betting on football games.<\/p>\n

If I buy options they are LEAPS, long term options. You must protect yourself from Time Decay<\/a><\/span>. From time to time I’ll post a lesson. Today I want to forget short term options and talk about LEAPS; and show a comparison between buying LEAPS instead of buying the stock using a real trade with Facebook (FB).<\/p>\n

On May 27 of this year, 3 weeks ago, FB was at $222.50. I liked the news and I wanted to get involved. I could buy 100 shares of FB for $22,250 but thats a lot of money for 100 shares. I wanted some of the upside I felt FB would have but I didn’t want to tie up $22,250. I decided to look at the LEAPS. I ended up buying 1 contract (100 shares) of the FB 1\/21\/22 $220 Call, which is a LEAPS. For this option I paid a $43 premium for a total investment of $4300. I invested $4300 instead of the $22,250, both investments involve 100 shares.<\/p>\n

Today with FB at $233.50 I sold my LEAPS position. Let’s take a look at the difference outcomes between the LEAPS I bought and if I was to buy the 100 shares at $222.50.<\/p>\n

If I Bought the stock<\/strong><\/p>\n

I buy 100 shares of FB at $222.50 for an investment of $22,250. I sell the stock today at $233.50. My profit for the 3 week trade is $1100. The Return on Investment (ROI) is 4.9%.<\/p>\n

Me Buying the LEAPS<\/strong><\/p>\n

I buy 1 contract of the LEAPS I described above. With the premium of $43 I paid $4300. I sold the LEAPS today with the premium of $49.75 which is $4975. My profit for the 3 week trade is $675. My Return on Investment (ROI) is 15.6%<\/p>\n

Comparison<\/strong><\/p>\n

If I bought the stock I would have made $1100. I bought the LEAPS I made $675. If I bought the stock I invest $22,250. I bought the LEAPS for $4300.<\/p>\n

I invested much less money and made a much higher percentage on my investment. Yes, buying the stock I would make more money but buying the LEAPS I but the balance of the money to work elsewhere.<\/p>\n

If someone decided to invest the entire $22,250 into the LEAPS and not into the stock, they would have brought in $3489.75. Still a ROI of 15.6%.<\/p>\n

My verdict is I like LEAPS!<\/p>\n

5\/27\/20 \u2013 Buy to Open 1 FB 1\/21\/22 $220.00 C @ $43.00 <\/strong><\/p>\n

6\/18\/20 – Sell to Close 1 FB 1\/21\/22 $220.00 C @ $49.75<\/strong><\/p>\n

Profit +$675<\/span><\/h4>\n
\n

I hope this example of my real trade with FB helps you make a decision on what you like better stocks or LEAPS.<\/p>\n

If you have any questions on this trade or the subject of LEAPS send me an email.<\/p>\n

Successful Trading,<\/p>\n

Steve<\/p>\n

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

First, I would like to welcome our new readers. Most readers know I do not buy short term options. You can do that strategy but I guarantee you will lose money. Always remember, 80% of options bought expire worthless. I would rather sell options! Every once in a while I’ll get a call from a […]<\/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-7879","page","type-page","status-publish","hentry"],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/P75MP0-235","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/7879","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=7879"}],"version-history":[{"count":2,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/7879\/revisions"}],"predecessor-version":[{"id":7884,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/7879\/revisions\/7884"}],"wp:attachment":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7879"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}