Janko RE: LEAPS and stocks
I see LEAPs as younger, brasher brothers of stocks. The more in the money the closer to the big Bro.
I agree. I guess my current LEAPS strategy is conservative leverage (esp. w/ SEG and CPQ) Prior to purchasing the LEAPS for these two I owned the stock of each. I decided to switch to deep in the money LEAPS for additional leverage with `stock like' behavior. Call me timid..
(here in Germany) INTC leaps that go a little further than say 3/99
Is that true for all leaps in Germany???
Why should it be any different?
Well, the only difference I see is not getting caught in say Jan 2000 in the middle of a market dip. Where with the stock you can just hold it for a few more months. Maybe I just have options'phobia (ie getting caught against the expiration date and low price.)
I'll use INTC for an example of how I'm thinking. It's fuzzy and not fully thought through.
I bought my contracts at a price 33%+ more than today's price. I didn't expect Intel to dip this low this fast. Now I'm thinking at doubling my leap position in the when the stock is at the 70-73range with the same Jan00 80 which is twice the position size I really want for 00Leaps. I may trade with « my position when the stock recovers later this year or early next year. Now if INTC is in the 72-75 range in June I can buy the 2001 leaps and have a nice staggered position. I want to exit my 2000 leaps at some near peak in the summer/fall 1999 and keep an eye on the 2002 leaps available next June. In this way I can roll my position continuously. Hopefully buying (far calls) in the valleys and selling (near calls) near the crests. At least this is my current theory.
I don't have a Hugh portfolio, so leaps give me all the exposure to the UP(and down) side that I can get, but with a fraction of the capital, in the cases of MSFT,CSCO, INTC, etc. SEG and CPQ are more of `stock leaps' I get all the exposure for better or worse. I got the same surprise with INTC. I woke up one morning and was 40+% down, on the 10pt gap down morning. The confidence I have is that I still have 600+ days to recover and gain.
Today I was seriously looking at ADPT 2000 20s,25s,30s. For some reason I like the 20s much more than the 25s. VYAAD bid:5 _ Ask: 6 ¬ ::VYAAE bid: 4 « ask: 4 5/8. This may just be conservatism from a lack of experience.
Any other views?????????????
Please feel free to point our any perceived flaws in my thinking.
Chris
PS
the only thing that may bother you, is higher volatility of the security compared to the underlying. Well, somehow you have to pay for the higher leverage.
If I didn't like volatility all my money would be in a US Government backed CD. <vbg :-> |
