Jet Black said:
Can you please plain the thinking here? How long do you plan to hold these? Why go so far out? I'm just trying to get a better understanding. Thanks!
Sure thing - Originally bought the $200 LEAPS when AAPL was around $108 on the last little market poo poo we had last fall. The thinking was "Apple was bound to rise back up after taking a shellacking", so I bought 4 of the $200s at around $500ish per contract (or $5 per share x 100) for long term price appreciation gains on the option value. My goal was to ride Apple back up, get the options to 100% return and go net free on 2 and sell 2. Then just let them sit as I had several months of time premium on my side.
Well this downturn we just had tanked AAPL, I watched my options which were above 60% return at the time decay in value. So I rolled them to the same expiry but just for the $175s instead. Same goal here. Just looking to control the options, ride the wave of price increase and still be able to sell them for a decent profit. The long dated nature just means I have more time on my side to be able to see the trade through and give the stock time to rally.
I'm basically buying options instead of stock and hoping to make great returns. I could have spent the $2K on 20 AAPL shares or bought the LEAPS instead and have control over 400 shares. I don't really have the capital on hand to buy 400 shares of Apple, so I don't plan to exercise the options but I can still make profit and flip them down the road if AAPL does rally and get closer to the strike price.