Tag Archives: leaps

Options Leaps and Time Value

I write this piece having brushed up on my formal derivatives training from 20 years ago. I went to a weekend seminar last summer to reacquaint myself with options and found the weekend valuable.  It’s a year later, and I put some capital to work. I had successfully recovered my weekend training fees by fulfilling “the required” in the market and submitting proof of my trades.

Margin accounts have authorization levels. You’ll start out by going long on calls and puts only. The closer your “strike price” is to being “in the money”, the more you’ll pay in premium. Obviously less risk entails purchasing calls or puts closer to the market price at inception. 

Then there is time value. The more time until option expiry, the lesser the risk. You start to see the moving parts involved with options. This is why no investment advisor wants you in them. They think you lack the capacity to absorb the variables in placing option trades. So, what are LEAPS? These are options which have a time value of one year plus. You’ve all seen stock charts right. The line graphs move up and down and oftentimes in a pattern. What if you projected that pattern outward while giving yourself lots of “time value” for forgiveness? You are not in options because you’ve been taught that risk is bad. I’m here to say that when you eliminate all risk, you can only expect a meagre return. There is actually an opportunity cost in not at least keeping up to “actual inflation”. Your investment advisor does not want to be proclaimed as a conduit of your options losses. Therefore, you need to direct these investments yourself. However; this would take some time in learning, researching, and acting on your own behalf on your own account. Interested?