just learning...otm leaps
most people choose otm because they are cheap, and afford much leverage......but they have a high risk attached as they are highly speculative and offer minimum flexibility.
believe roth book will point out the strategy of itm, ditm leaps used as a stock replacement, in fact better to do this, then borrow on margin to go long the common. the ditm is actually cheaper then the otm and dotm, as it has intrinsic value and is marked closer to the market...
look at a qcom options chain, notice as you add the premium to the strike, how close the ditm comes to the current market. buy a 200, and you have to move 80 points plus the strike to break even. the stellar past performance of qcom can't be guaranteed as currently the momentum is broken. buy a ditm and should the stock soften or trade sideways for a while, you can write covered calls against them and receive decent premiums...not really worth it if you are otm or dotm...
you get what you pay for...intrinsic value is costly, but you are immediately in the game...otm, dotm may keep you on the sidelines as time erodes your position
good luck...ed a. |
