Leaps or margin reddit Reply reply UniqueUsername35835 • imagine the gains if he wins Reply reply More replies More replies. $400 strike with . If you buy OTM leaps, you can't really do this, but as others have already pointed out, your profit potential is much higher. for PMCC or just to be long the market in a retirement account. If you put 20% of your portfolio into OTM LEAPS and the underlyings stay flat, you will have lost 20% of your portfolio, as opposed to staying flat if you just held the shares. Log In / Sign Up; In my estimation the current share price is not necessarily the floor, especially considering the Twitter deal, and Elon’s margin loan linked to TSLA. I do this now in my IMA but only with stocks I intend on holding near term. You don't write the S in IRS as lower-case to indicate your are talking about more than one "IR. 60 according to thinkback for 2006 and 2007 so these trades were a net debit and had risk of money loss if spy remained stagnant. You can find dozens depending on the stock, leaps do NOT have more downside risk at all. Someone tell me why I shouldn't sell my 100 shares of Tesla (made a profit on it still) and convert it into 2x 2023 LEAPS deep in the money. It should totally hit within a year or a year and a half. A bit more competitive than broker margin but not as good as short SPX box spreads. I am wanting to trade calendar spreads (debit) using a cash account (i. Discussion Not a bad strategy unless you sell the CCs too close and your leaps get called away, unless that’s what you want Reply reply Make sure you calculate what your margin requirements would be at different levels should the market go against your trade. No, the broker will not automatically exercise the LEAPS and you would not want that anyway. I aim for . If you're holding overnight on margins then most investors would recommend 50% at most, most investors on r/investing would say 25% at most, and ideally you really just use only 10-15% or 0% while waiting to use margin to go into positions in the case of a market downturn/correction. With LEAPS you don’t have to worry about capital once your position is opened I have used LEAPS options to get long SPY and have been profitable with this strategy. PatriotWrangler1776 • Yes LEAPs on TQQQ are a great strategy. Meaning you aren’t going to end up in a margin call like if you were using margin from a broker. Or check it out in the app stores Buying SPY leaps on margin, selling PMCC to cover the interest + profit . With 50% you are still below the optimal leverage ratio (historically) so you are expected to outperform with this amount. Shorts used LEAPS for GME to roll their positions after the "Sneeze", which occurred end of January 2021. I gave the simple case of long calls or puts. 1200x leveraged, let's go. If the underlying has dropped a lot, implied volatility is View community ranking In the Top 1% of largest communities on Reddit. S. Or check it out in the app stores particular for those utilizing Portfolio Margin. Sure you are. If you have over 1M borrowed on margin then brokerages I think cut that down to something like 5% or 6%. The margin required will be very low and they will probably be much cheaper than just call leaps on SPY Yes, exercising early this wipes out the time value of the option contract, but in an illiquid market the bid on your LEAP + strike price may be close to if not lower than the market price. Members Online • xRussianWintersx. They don’t really come to a conclusion though about why they still prefer LEAPS; in fact, they seem to be praising the idea of buying on margin (within reason of course). They just aren't covered calls. Covered calls require shares, period. Or check it out in the app stores Anyone ever leverage their LETFs by buying LEAPS or synthetic futures of each while still maintaining the ratio? The TQQQ/TMF combo is gold. Maybe during a dip (S&P 10% drop) I'll go long on LEAPs, but who knows. Well to make sure even if the price is below that $10 and the call is worthless, I can make my money back over time by selling weekly calls above my leap call to pocket money and make my negative $500 go slightly positive, because the long call covers the delta of the weekly call therefore you don’t I hold leaps in my TFSA and, while it says I have 'Margin Power' I am unable to use the additional margin from my TFSA to buy anything in my Margin account. I was previously able to do this. At a strike of $10. Margin effects of buying LEAP calls on cash account (IBKR) Hello! I was looking at LEAP calls on the Euro Stoxx 50 index, and when previewing the order I see that if it make sure the leaps call spreads aren't crazy wide. 5B) there should be less downside speculation. On the portfolio margin sub I've said it many times: If you care about the extra margin from SPAN (compared to portfolio margin) you're trading too large. They also needed to kick the can as far as possible, which means their expiration date was set three years later (the farthest you can purchase LEAPS), falling in the next available month in GME's LEAP cycle, which would be June. 5% to 6% borrowing costs for broad US index ETFs. If you are long a leap call and short a near-term call, that’s it. However, an alternative is to get access to options level 4 which would allow you to sell naked calls. I might liquidate or margin another LEAP honestly. IBKR has a help section Reply reply Terrigible • If you expect a huge crash/correction coming, don't use any margin. It seems like the consensus is that short term go for leveraged ETF, long term do LEAPS. Then you’ll do fine. 8 delta, so I tend to look at strikes around that. 10 delta 30 DTE calls over it. 8 delta LEAPS and the underlying moves $1, you've made $50 and I've made $80. Posted by u/Francbb - 3 votes and 8 comments I buy deep ITM leaps and then sell OTM weekly/monthly calls against them (PMCC). Just for OP to know there is margin maintenance requirement that can change based on individual securities. Pencil out your risk and reward curve, and you may decide you’d rather just buy two leaps or sell two puts. As an example, you can sell the June 2021 950p and buy the 950c on Tesla for about 3-4,000 debit, and buying power reduction of ~42,000 total. More Hi everyone, Relatively new to options (< 1 month). IBKR not really that helpful when asking this question. 1) Selling LEAPs are is a pretty bad deal (in terms of annualized interest). ADMIN MOD Selling far OTM credit spreads on SPX LEAPs . Also have bought shares all week and during the dip. - LEAPS can suffer from an inverse volatility effect. 8 DELTA will cost you around 25% of the cost of the stock while giving you 80% of exposure to profit. Now it's definitely less "guaranteed", at least as much as anything is in the market, so one does have to at least consider just rolling options. I have to correct one thing on my previous statement as this is suggested for 0. Your other concerns should be the fact that LEAPS have wider bid-ask spreads and are really leveraged. In my case, I find that I am in a growth phase. All this is super basic stuff used by professional traders all the time. They will force a margin call and liquidate securities if you can't wire them funds right away. The collateral, or margin requirement for options is one for one. Any gains made within the account are tax free. I see it as a last resort option though. 8 DELTA will Using LEAP call options is more complex than purchasing stock on margin, but the rewards can be a lower cost of capital, higher leverage, and no risk of margin calls. There's nothing special about LEAPS other than their long time to expiration. Right now your leap is out of the money so you aren’t really going to be able to effectively execute the strategy. What that means is that if you have other fully paid securities that are acting as collateral for the margin loan but no cash in your account and you turn on margin investing, whatever money becomes available as “withdrawable cash” you could choose to spend on options, the same way you could withdraw that money as cash (and They rebalance daily. 100 Shares of USO costs $6079 and consumes $911 of margin with a position BP effect of $5167. In addition to SPY, I also do ASHR, FXI, VGK, VWO. --> only use options if you understand them, otherwise you'll end up on r/wallstreetbets Interesting, I didn’t know margin was required for options. Anytime you get assigned, you can exercise your LEAP call to cover it. Not until 2009 could you do this trade on a net credit due I do not have an opinion of my own on it but what i have gathered from the content is pretty much risk management. Even so, the leaps would have to be immediately exercised to produce the shares for the covered call to be exercised. Edit: to add to this, the main advantage of using margin, in my opinion, is to use it for selling puts. I know there are no additional margin requirements but you need a margin account. The last thing you want to happen is a margin call you can’t meet and your position is liquidated right before the market rubber bands. Use the cash proceeds from closing the LEAPS to help cover and close the assigned short shares. No penalties for trading LEAPS at all as long as you don't withdraw any funds. Just remember to take profits when you have them Reply reply WiseAce1 • • Edited . Quite honestly I'd recreate a leveraged strategy of your choice using leveraged ETFs like 2x SSO or 3x UPRO. This would If in an IRA you need to have limited margin and the 'spreads in an IRA' paperwork filled out. One LEAPS call, two LEAPS calls, is how you form the singular and plural. It can be a great move in a bull market, but you can lose a lot in a bear market. Been there crazy not being able to close a position. No matter what your margin requirement will never be more than the price of assignment tho Yes, $2000 is the minimum (US/Canada) requirement for opening a margin account and then using margin. But what if the underlying makes a drastic move up after I sell my leap? Is Deep itm leaps are basically the same as leveraged stock. for 100K account a 2k leaps is 2% and if it dies you just That's harder to do with OTM LEAPS because you'll have to sell even more OTM CCs. - The share owner receives the dividend and the call owner does not. 83 delta. Most people said it was Of the three possibilities: margin, options and leveraged ETF's, I like leveraged ETF's. When answering the questions, don't sound conservative with your money. I'm currently having access to a margin rate of SOFR+1% so it's not a big improvement over trading using margin. Convert 100 shares into 2 LEAPS for 2x Covered Call Income . If you want to write about a single contract, write LEAPS call or LEAPS put. If the stock tanks hard the short put will hurt a lot more than the long leaps call. However I can do a buy-write of a CC at the same price. Portfolio Margin and Leaps . SPY is a great choice. You are right that LEAP provides a low borrowing cost. The point is the short call pays for most of the cost of the put and you track almost perfectly inverse the share price. Using margin with a 50% initial requirement would get you double the share gains listed above with less risk then the calls apart from absolute catastrophe in the market, so that would probably be better than going any deeper past 50% of share cost on your options. 2023 LEAP for around $9K. Remember that they're trying to protect themselves, not you. The account page says I have 20k plus of buying power but when trying to buy even a few hundren dollars of common shares I am unable to so so. The collateral for sold puts is the only thing, to my knowledge, that technically uses margin, but doesn't actually charge you interest. The other benefit of the leap is margin and BP reduction or reduced interest if margin is used. You’re doing a PMCC. If the strike is $400 and the 80 delta call costs $200, the call gives you 2x leverage (1. For that 3:1 leverage on a 2 year deep ITM LEAP you roll out after 366 days if it's in profit, I think most breakdowns I have seen put the carry cost around ~5%, which seems about right. Risk still has I am also selling a few OTM puts (on margin at least partially) that I will keep some of all of if assigned. Let’s say all my buying power is tied up in options but I want to close my short call for a loss and then take the gain by selling to close my leap. But even then, each one of those calls costs $21,400, and thus this approach requires at least that much money, if not way more, to If you purchase those far out, as leaps, the price you pay will be lower than 100 shares, due to the time value. They use LEAPS (at least 1y, better 2y) to participate from the increase in stock market over a this timeframe. Actually, if you want leverage without the Get the Reddit app Scan this QR code to download the app now. You can cap the margin requirement by buying a wayyy OTM leap call to create a bear call spread. I took the loss on the But I haven't considered buying LEAPs on margin either. I only use 50% of the margin in my account because in the event of a true market collapse the value of my brokerage account could realistically fall by 50% therefore my approved margin could fall by 50% and I don't want to get margin called. You will want to close the LEAPS options which in most cases will result in an overall profit. The goal is to keep cash available and be able to keep attacking when I see opportunities. Don't get greedy. Using long-term equity anticipation securities (LEAPS) with an expiration period of up to three years can be an alternative to buying stocks outright. Your experience and history with LEAPS 1 or 2 years out? term leaps and they do allow for some leverage without the risk of margin calls but I always thought holding long term leaps cost more than margin interest in theta decay. Hello, would like to know if Deep ITM LEAPs Options with a lot of time left are eligible for margin calculation in Portfolio Margin type account. Do you think LEAPS ever have a role in situations like this? Kudos on the SSRN reference. The official Python community for Reddit! Stay up to date with the latest news, packages, and meta information relating to the Python programming language. ) which is highly unusual and not advised. What is your guys' preference out of the three mentioned in the title? Looking at LEAPs in Fidelity, I'm coming up with about 4. Reply reply More replies. Using LEAPS can result in LEAPS are a loan to a counter party, just like buying stock on margin through your brokerage. Edit[Plus, on Monday I am going to be paying my debt down by $250 and I am going to buy 1 share for $103 and make another $250 deposit to clear my margin debt. For a crash, hold an SPY LEAP put that can be 300-400% if the market crashes and just roll it year after year so you’re always “insured”. View community ranking In the Top 1% of largest communities on Reddit. " So you write the singular as one LEAPS call, and the plural as two LEAPS calls. However, now that he’s reduced the margin loan by 50% (6. Or check it out in the app stores TOPICS IBM doesn't have the silicon and Google's tpu underperforms nvdas v100 by a big margin. My main concern is I'll have to watch it continue to go up and be unable to roll up anymore, but I guess I can live with that knowing I'll be making a decent return over the time. Get the Reddit app Scan this QR code to download the app now. If you are long a leap call and Get the Reddit app Scan this QR code to download the app now. The last thing you want to happen is getting margin called and your options forced sold. so QQQ could down 34% across 2 days, and TQQQ would not go down to 0. But if you cant afford to hold multiple of 100 shares, and use margin for options/leaps, that's just leverage and expose yourself to much higher risk (than lets say buy 20 shares of spy and hold). At 2x margin a small move in the market can mean you get margin called or wiped out. However, there are various structures that might have a long LEAPS call as one leg and a short call with a near-dated expiration as the other. It's I already have margin. Gang, Looking at LEAPs in Fidelity, I'm coming up with about 4. You do need a margin account to trade spreads. That’s complicated, as there are many kinds of “options trades”. but something about how these funds are managed, they close out and reset their margin every day. Join and Discuss evolving technology, new entrants, charging infrastructure, government policy, and the ins and outs The price of your LEAPS can and will change value (even if the stock stays still) from changes in implied volatility or just time decay. I’m not saying this can’t work, I’m just saying there are LOTS of smart people and computers working hard to make sure that if there is even the hint of a free lunch that they’re first in line. Well let’s make an example, say u buy a leap call out a year, for $500. A LEAP is just stock with leverage unless the IV is through the roof or abnormally high, it’s like buying shares on margin usually 5-10x, therefore the returns would be similar. and International This last one probably has a lower maintenance cost than either the regular buying/selling of DITM LEAPS or going into margin to buy 2x as much of 1x S&P shares for the same total level of exposure. Ease of use. I was just thinking of ways to magnify both of them so that they're still in balance, but the whole account grows at a faster rate. Buy LEAPS and you now have a wasting asset based on a very slowly wasting asset and the market will have tried to price any move in with IV. Since having margin allows you have extra buying power to use for collateral. If it is, and you can't afford a leap on an ETF like the spy (500-1500 depending how ITM you wanna go) that will return roughly 360%, then get a leap debit spread for hella cheap with a breakeven price right where it should be i would highly prefer using all of my capital for the LEAPs themselves That would be a mistake, and in any case, you ought to write LEAPS call, not just LEAPS, since LEAPS puts are also a thing. +1 60c / -1 60p 360dte costs $75 and consumes $909 of margin for a BP effect of -$846. Buy /ES synthetic leaps calls. If you want buying power relief, sign up for a margin account and go for a synthetic long shares position (long call + short put @90+ DTE). Gang, I want to add leverage to my portfolio as a buy-and-hold strategy. Expand user menu Open settings menu. Well to make sure even if the price is below that $10 and the call is worthless, I can make my money back over time by selling weekly calls above my leap call to pocket money and make my negative $500 go slightly positive, because the long call covers the delta of the weekly call therefore you don’t A LEAP would take time (not a lot but it isn't instantaneous) to exercise to buy the stock. No matter what your margin requirement will never be more than the price of assignment tho BTW, its "LEAPS call" or "LEAPS put", not just "leaps". You could write the title of your post as "Anyone trade LEAPS Near the beginning of the year, I usually max out my ROTH IRA contribution, sell all my current LEAPs in my ROTH IRA and buy as many LEAPs for the latest date as I can. lol_LEAPs Reply reply IBM doesn't have the silicon and Google's tpu underperforms nvdas v100 by a big margin. there is plenty more room to fall with shares Keep in mind the margin costs 2. The requirement is 100%. How are 3xLETFs compared to this? You might be getting Margin for less, but I can only margin 2x. Unless you are selling a naked put, a cash secured put locks in the value of the strike x 100 shares that you cannot touch or invest in other opportunities. According to my methodology, and please correct me if it is wrong, margin loans appear to be the superior option, especially for someone like me who is young and has a smaller account. Only when I have a good margin of safety I will begin adding leaps. With a similar "complete loss" scenario in a bearish or flat market as buying on LEAPS: QUICK TAKES. You could buy DITM leaps as a method to get twice as much exposure to the S&P just like you could potentially go on margin to get twice as much exposure to the S&P. Reply reply ase1590 • IBM is currently leading for quantum computing, whenever that decides to take off Reply reply I'm having a hard time finding any info on people rolling 'normal' covered calls out to LEAPs to 'fix' them. Selling Puts. Nothing like buying option leaps on a The price of your LEAPS can and will change value (even if the stock stays still) from changes in implied volatility or just time decay. The margin interest rate would need to go up by another . My LEAPS contract is $80 AMD Call expiring in 2024 and the contract I sold is AMD $117 Call expiring on 2/18/22 (I have now bought to close this contract) Reddit's home for tax geeks and taxpayers! News, discussion, policy, and law relating to any tax - U. I always look furthest out and noticed them listed, but without pricing yet AMZN LEAPS. You’re correct, getting margin called is absolutely still a risk if the price moves against you. Does anyone out there know of a broker that allows the purchase of LEAPS 75% on margin, which I believe has been allowed by various regulators for severall years now? comments I'm starting to consider replacing margin with LEAPS leverage, buying deep ITM LEAPS (2024/25 expiration) and roll forward yearly. Otherwise, I have seen people saying 20-30% is the sweet spot. 5% to 6% borrowing costs for broad You don't need a margin account to trade single long LEAPS. Make sure you calculate what your margin requirements would be at different levels should the market go against your trade. 5% APR number is coming from. 40 or so while the calls were 11. r/interactivebrokers A chip A close button. If you have margin constraints, then just exercise one contract (100 Hello! I was looking at LEAP calls on the Euro Stoxx 50 index, and when previewing the order I see that if it went through would increase my "equity with loan", "initial margin" and "maintenance margin". They go over different concepts like buying deep ITM LEAPS, etc. Buy call LEAPS on a 1:1 basis and put I started to buy TQQQ LEAPS with expiry date January 2025 (furthest date available) at strike price $45 since January this year, until last accumulation on 12th May. I use them on undervalued stuff that have a likely catalyst to move up, but I don’t know when that will happen. You might say that's likely to happen given more future rate hikes by the federal reserve. The plurals would be LEAPS calls or LEAPS puts. LEAPS are option contracts with more than a year to expiration; Functions similar to buying or shorting up to 100 shares of stock; LEAPS have low The other benefit of the leap is margin and BP reduction or reduced interest if margin is used. 75% margin on LEAPS . This is the Reddit community for EV owners and enthusiasts. so e. I plan to sell Get the Reddit app Scan this QR code to download the app now. buying say 10 2026 calls in a stock and selling 5 covered calls with shorter expiration, around a month out. A 2 year ITM LEAP with around 0. I believe the worst case in this scenario is that in late 2023 or Jan 2024 I end up losing $5200, which if it’s ~10% of my portfolio, I am fine with losing. I can sell a 30ish DTE at $200 for a bit over $2K, but I can sell the Jan. Members Online. take microsoft leaps sell for 23, but the share is 285. If you stay on top of the margin debt and never fully use your margin cash and non-margin cash fully. For a comparative return with 41DTE, your strike price is going to be higher than the current stock price. Example; I buy XXX $120 strike, it moves up to $150 and I decide to now sell a call at $150. One thing I wanted to ask is about the effectiveness of buying a LEAPS, with REALLY far out expiration, DEEP ITM (>0. The price of your LEAPS can and will change value (even if the stock stays still) from changes in implied volatility or just time decay. Posted by u/Zeune42 - No votes and 14 comments Get the Reddit app Scan this QR code to download the app now. How does this compare to leveraged ETFs like SSO or UPRO, where the expense ratio hey, there are few people in the group who manage to always give an answer regarding complicated margin requirements and options. They asked the “margin requirement” for “trading options”. if you really like your leaps calls and you do not have any more cash and you don’t want to roll them to a higher strike because you feel it is going to go down soon you can sell puts against those short shares (covered put), this is risky because if you are trading meme stonks your margin requirement will go high with the underlying and you risk getting a margin call. Even if you have to do a 100% margin requirement on the puts (the same amount as just buying 100 shares at the strike), you can still use your margin power without actually incurring margin debt and paying interest, which is nice. LEAPs you can better toggle your leverage multiplier by picking what strike you want to play. I would start with 10% or 20% and learn the mechanics before going for 50% or 60%. Deep ITM leaps have insane spreads, to get filled as a buyer it works out to be a 7% apr interest rate for the associated interest factor. Buying a 60c aapl leap is comparable to buying 100 shares on 2x margin, except the premium is probably more than the interest on the margin would be. g. They take up a less percentage of your portfolio but options lose value faster than stock so when there’s a Options are non-marginable, so money in LEAPS isn't contributing towards available margin if you are into other theta strategies like writing puts, spreads etc As options have expiration, there is always a chance underlying could dip and not recover till expiration. UPRO leaps on margin, plus take out a personal loan with your house, car and wife as collateral and yeet that into UPRO leaps as well. Specifically when my cost basis on shares have a good margin of safety. There is no such thing as "LEAPs". At least for Jan 2006 there is no Jan 07 Leap so I'm using the closest leap to 365 days which will be 15 DEC 06. In both cases, you would get absolutely crushed if the market went down. If something becomes volatile, they could change the maintenance requirement to 100% which effectively means no margin use, AFAIK. czarchastic • UPRO and other 3x leveraged etfs experience worse slippage than leaps do. That's what happens when you are several multiples of downside risk and the underlying goes down. Only do this If you’re asking Reddit about using margin on $500k then don’t do it. Also, another interesting thing is the ATM puts were 5. However, in the UK I LEAPS are basically a way of gaining leverage (similar to as if you were using margin), but with some additional cost in extrinsic value. I've seen people on here essentially use them as long stock with less margin impact, i. For sideways market keep your leaps and use extra cash to buy shorter expiration dates calls and puts at the tops and bottoms of the channel. So if you can afford to buy deep ITM leaps, then there is no difference between buying 100 share lots outright or deep ITM leaps, apart from the So the short call and the long leap may not be paired together unless they have an option to buy/sell a combo for that. These are different. Does questrade have lower margin requirements for options? I hold leaps in my TFSA and, while it says I have 'Margin Power' I am unable to use the additional margin from my TFSA to buy anything in my Margin account. If you are scared of missing on a rebound you can always close the leap and buy the shares in a My short answer is that 2:1 equity leverage is not a good idea, especially for those who are not experienced traders with disciplined risk management. I split the LEAPs between SPY LEAPS in my ROTH IRA and QQQ LEAPs in my wife's ROTH IRA. Are they less risky? I don’t know. If you want to hold the LEAP then buy to close the call you sold and take the loss. That's the whole point of a ROTH IRA. This strategy works best for index. However, towards the end of Chapter 8, the authors briefly discuss the option to implement the Lifecycle Investing strategy via buying ETFs on margin instead of LEAPS. I presume, but don't have any numbers to show, that the LEAP could have a 3x leverage on TQQQ. You only need a 2. look for a reason to "like the stock" on some fundamentals criteria (could be large net profit margin, growing revenue and/ or eps, they make an amazing product, etc) if it can check all three boxes above, then go to the farthest or second farthest out expiring option chain. Another issue of LEAP is that every time you roll it there's a tax event, which might be unfavorable. CONS: LEAPS calls expire, shares don't. SPAN regulates futures margins such that we would see initial margins as low as 5%-10% of the notational value of a futures I think that over the past few months LEAPs were 100% the route to go due to premium being so low on beatdown stocks. So, even through 5 contracts just got executed I can’t write a CCP for the exact same amount that I got from the execution. Open menu Open navigation Go to Reddit Home. In this uncertain scenario, I have changed my strategy from selling 30-45 days to selling OTM leap puts( atleast 1 year out) and closing them in Skip to main content Open menu Open navigation Go to Reddit Home Usually you can do this for about 40-50% of the actual cost of the stock, so it's equivalent to using margin without paying the interest. That is if the long positions is type margin make sure the short position you are tying to open is also type margin. 5 delta LEAPS and I buy a . But leaps are great and I both buy and When you get your gains from your leaps, do you simply pay taxes on them at the end of the year as usual and is this in no way incurring some penalty? Reply reply Ill-Direction-4716 • No taxes. You could write the title of your post as "Anyone trade LEAPS Long LEAPs: 0% Short LEAPs: 10% * I'm shorting leaps due to tax reasons (I save around 40% going long term cap gains. Reply reply So-I Why are leaps not considered a great option to invest long term? In context: So many companies are undervalued but personally for me it’s impossible Skip to main content. The margin requirement for this is probably 20% however if the stock moves down a lot the margin requirement is gonna go up so just make sure you keep a good buffer of available margin especially in this market. I asked about margin on r/personalfinance and they crucified me. e. While 3x UPRO sounds more dangerous there is a lot of simulations that show the higher exposure is better when you dial it back to under 200% portfolio allocations as it lowers your exposure to I use a lot of long term leaps and they do allow for some leverage without the risk of margin calls but I always thought holding long term leaps cost more than margin interest in theta decay. Other than that you can sell a call against a long option position. You should be able In my case, I find that I am in a growth phase. But LEAPS offer you the possibility of amplifying your gains like with leverage, but not risking a margin call or paying monthly fees for margin. Buying a LEAP put and selling a LEAP call at the ATM strike. Use it to buy the dip. So I'm curious where the 2. you can exercise your LEAP call to cover Posted by u/OnyxTrader2 - 6 votes and 1 comment Assuming the cost basis of the 100 shares would be the same if you bought a leap or sold a put, the real difference is control and cash on hand. Pick the answers containing Get the Reddit app Scan this QR code to download the app now. Margin: you pay margin interest and your account can go negative. By normal I mean 30ish DTE. That also makes it much easier to form the plural: It's not 1 LEAP and 2 LEAPS, it's 1 LEAPS call and 2 LEAPS calls. Then sell covered calls from that. . But again as soon as your Well let’s make an example, say u buy a leap call out a year, for $500. But all you need to do to create the trade if you already own the leap is sell a call. Most people would put this into a Bond ETF, but hell what if the bond market collapses. I do this now in my IMA but only with stocks I intend on holding near If you want buying power relief, sign up for a margin account and go for a synthetic long shares position (long call + short put @90+ DTE). Interesting opportunity with $10 calls on some SPACs Margin requirement vs using (or purchasing on) margin. Beyond that, I prefer ITM LEAPS because of the higher delta. edit: Also, to give an idea most futures is 10:1 leverage and most equivalent ETFs on PM allows 6:1 leverage. 349DTE: NOT POSSIBLE! For a 370% return, you'd need the premium to be more than 3x the strike; How to interpret this. Margin is also great for more complicated option spreads that allow you to put little capital down while managing large cap companies. It depends on your view. However, your draw downs will be 50% I am late to the show but the answer is that margin requirements for futures market (and its futures options) are governed by a set of rules that are separate from another set of rules used to determine margin requirements for regular stocks and its options. Thinking of selling out of SPY shares in wife’s IRA and doing a 2024 LEAPS on AMZN for a strike that is priced at $46K. Once you've accumulated some shares, you can start using margin and buy more LEAPs. An account that size would not allow you to be short 100 shares of AAPL even if it is a margin account. That and the market is very high right now, with high volatility, so odds are short right now. There's a dropoff around . Personally, I’m holding my LEAPs as they are dated very very far out and I believe in the future of this company. the idea with leaps is that the often are moving almost cent for cent with the share but leaps have a max value that is significantly less than the value of the shares. Use margin wisely. Or check it out in the app stores Been looking at using SPY LEAPS as a safe (compared to my other strategies) portfolio addition. I think Leaps are a capital efficient way to get long on an underlying but lately I have been wondering if I should go long with /es futures instead, to get similar exposure and even better capital efficiency. Also if you are now short those share and in margin call, that means you also don't have enough funds available to exercise the LEAP to buy shares even though by doing so it would resolve the problem. You need a better understanding of what you’re doing. You don’t need to depending on the stock, leaps do NOT have more downside risk at all. 5% per year there which you need to pay even if your whole account drops for the next year or two. My goal is really simple: Use IBKR Pro to occasionally borrow against $60k worth of Skip to main content. For View community ranking In the Top 1% of largest communities on Reddit. LEAPS is not the plural of LEAP. I would then of course sell . Get app Get the Reddit app Log In Log in to Reddit. if you bought QQQ 3x leveraged margin though, and QQQ went down 34% over 2 days, you would have lost it all and be margin called. Conclusion, selling puts (otm, itm, leaps w/e) are always better than holding shares IF you play big wanna hold 100, 200 shares anyway. LEAPS can be puts or calls, so you have to specify which you mean. You also There is no such thing as "LEAPs". +1 30c 360dte costs $3140 and consumes $800 of margin for a BP effect of $2324. Often times it's better to buy stock on margin. If you want to let it go then getting assigned is no big deal. But taking out loans or using margin for selling covered calls is a super high risk low reward trade that i’d advise against. LEAPS are great, but they depreciate and if you lose too much delta you can't run call diagonals safely anymore. If you are scared of missing on a rebound you can always close the leap and buy the shares in a situation like the above. Obviously I don’t have the cash to close the short leg so I would either have to use margin or close my leap first. I can take more leverage purchasing less deep LEAPS, but I would be paying more The margin interest rate would need to go up by another . Somebody is going to come out of hiding here to talk about nonsense like "volatility drag on leveraged ETFs", I know it. I keep doing so until my cost basis is near 0 or the underlying price has moved so much that I can't pass up the profit. The margin requirement is obviously zero but without a MARGIN account I will not be allowed to sell the call. A "risk-free" 7% apr is amazing for the leap seller delta hedging by buying long shares and so on. there is plenty more room to fall with shares Posted by u/Francbb - 3 votes and 8 comments In a way? For example, GameStop stock. If I'm already maxing out my margin or get a large margin call, I could roll out to the LEAP to try and save my positions or get more cash today to buy more of whatever. Margin interest is usually around 9%. I am addicted to LEAPS and trying to figure a way to play AMZN. I have been taking advantage with put options the past few weeks, however, with the market at record lows and possibly further down to go due to the current coronavirus situation, I assume in the near future that this will be a once in a decade opportunity to buy stocks cheap for many of us. You might say You can buy options with margin, but not on margin. But yea if SEC gets rid of LETF I guess would have to figure out a better alternative, probably just having 10-20% of portfolio in LEAPs or something the daily reset was something with the margin. Edit: Make sure both positions are the same trade type. It may require margin however but usually at 20% or so. Question: lets say i have a high conviction stock and a clear price target which would satisfy me in future to sell at, could I sell covered calls leaps (1-2 years) deep otm at the price I am happy with and use the premium to buy more shares Like a 180 strike for MSFT. IBKR / LEAPS and MARGIN . Sometimes they offer free margin up until a certain dollar amount so it’s worth checking what Fidelity offers. You could get a But LEAPS offer you the possibility of amplifying your gains like with leverage, but not risking a margin call or paying monthly fees for margin. The costs of doing this is the time value difference when rolling, but because the LEAPS are deep ITM, their value is almost exclusively intrinsic and theta decay is very low. Thanks. It’s not the question OP asked. Please DM the Mods with proof of portfolio margin to get verified and be able to post top-level comments. Premium shouldn't be a problem. It's a flat premium instead of using View community ranking In the Top 1% of largest communities on Reddit. Another way of leverage is with options, either buying deep ITM LEAPS or using a box spread (ONLY ON EUROPEAN STYLE OPTIONS, so you the option can't get excersized early - any index like SPX would work) to borrow which should cost a bit less than IBKR margin. LEAPS is an acronym like FBI or IRS. You could write the title of your post as "Anyone trade LEAPS So the ITM leaps are a balanced approach to leverage. 7 delta but I might go up or down based on interest and the call ask spread. Or check it out in the app stores Leveraged ETFs vs LEAPs vs Margin . Interesting opportunity with $10 calls on some SPACs Yes, $2000 is the minimum (US/Canada) requirement for opening a margin account and then using margin. But a cash-covered put has to be cash-covered, so no amount of margin helps. Someone I know that uses IBRK in an IRA in the US can make the trades without a margin account. They mention that the S&P500 hasn’t had 2 lost years in a row. 5k initial margin and can keep positions that have good liquidity unlike that deep ITM call. With LEAPS you don’t have to worry about capital once your position is opened Like a 180 strike for MSFT. 8 delta ITM 2 years out LEAPS that you should have at max 10-15% of portfolio in LEAPS and rest in long term investments. I mean, you're buying LEAPS. The account page says I have 20k plus of buying power but when trying to buy even a few hundren Otherwise, consider a synthetic short share position. PROS: LEAPS calls provide leverage. r/investing A chip A close button. Log In / Sign Up; Advertise on If your stock pick really explodes the leaps will give you a better return than the short put, if the stock stays relatively flat the short put will give you a return while the leaps does nothing. - LEAPS tend to have wide bid/ask spreads so adjustments can be more costly. If you're holding overnight on margins then most investors would recommend 50% at most, most investors on r/investing would say 25% at most, and ideally you really just use only 10-15% or 0% while waiting to use margin to go into positions in the case of a ATM LEAPS cons: higher theta decay than OTM per $ of premium, trades flat over time despite ups and downs Please note that as a topic focused subreddit we have higher posting standards than much of Reddit: 1) Please direct all advice requests and beginner questions to the stickied daily threads. Special Purpose Acquisition Companies (SPACS), Units, Warrants and the best DD on Reddit. Works for individual At least for Jan 2006 there is no Jan 07 Leap so I'm using the closest leap to 365 days which will be 15 DEC 06. Try to buy them at the midpoint or better and use spread orders for rolling them. 85 delta) on, let's say, VT, can provide better returns than buying the stock directly as it provides leverage without needing to use margin (you pay for your leverage in the form of theta decay, which is predictable). 6x delta-weighted). my opinion LEAPS calls don't have any market condition in which they are superior to all other trading strats and structures. I plan on adding stocks and selling covered calls and cash secured puts down the road. 74% for the margin loan approach to have the same break-even point as the LEAP approach. NVDA is by far the ladder in AI training hardware. If you buy a . I would also add that the ETF likely has better trading liquidity and commissions if that’s of concern for you. Just depends on whether you want to hold the LEAP or not.
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