Much of my trading surrounds short term trading, sometimes day other times weekly and monthly. I pay attention to the charts and look for exit points accordingly. However, at this time of year I look at the macro situation I have to make a determination on how the market may perform over the next twelve months. Clearly the Fed is accommodating and will continue for some time to come. Hence, longer term ideas can be attractive, but what if you lack the capital to just buy stocks? LEAPS might be the answer.
LEAPS are long term equity appreciation options, the same qualities as regular options but just have longer maturities, and they go out to January (you will see them in 14, 15, 16 and perhaps longer years). Rather than buying stock the LEAPS give you tremendous leverage to gain ground vs the stock. This worked in a big way for many stocks in 2013 if you went long calls.
Likewise, LEAP puts are a great way to bet on a trendthat looks negative or just to buy some long term protection, even selling out of the money calls against your stock (covered call) to lock in big time premium.
WATCH LIST
I’ve made a good list of names that hit my screen as candidates. Naturally, it’s not perfect but I have some diversification here, spread out the list wide and will put up minimal capital (relative to a stock buy). I talked about FSLR, GM, GE, GILD and others in my webinar yesterday. I outline the approach here and how I will manage the trade over the next twelve months.
= =
Bob Lang has been managing private options trading accounts for clients since 2004 and providing subscribers with guidance on trading options for income at Explosive Options since 2011.
