For anyone that uses LEAPS, what do you think the expected return is? @pinnaclewealth I know uses them, so I'll call on him, but I don't understand why there would be a positive expected return. I'd actually expect a somewhat negative expected return... Aren't you paying a premium for convexity?
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19 Comments
Jesse Franklin@pinnaclewealth · 1d
Return is based on delta and movement of stock .90 Delta will move .90 cents per dollar movement of stocks . Deep ITM LEAPS actually carry less extrinsic value relative to their total cost, which reduces your exposure to time decay and deeper iITM the more Intrinsic Value. Yes if you take them to experation theta will increase the last 21 days . Also have to pay attention to IVR to avoid IV crush .
Mr Financial
@mr.financial · 1d
The only thing I can think of is .... Cheap leverage and long term hedging.
Mike L
@noviceadvisor · 11h
My xom leaps suggested by beskar was up like 1200% this was just a simple buy and hold and no fancy strategy
Moe
@moe_on_margin · 1dEdited
Nothing I’ve ever traded delivers bigger return than a LEAP that goes deep ITM a few months before expiry… NOTHING! 😂😂 I’ve seen people 10,000% return in a year https://link.blossomsocial.com/7uYa/3dwb8sw8 I’m personally sitting on leaps with 200%, 127%, 80% unrealized gains
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