Today, as part of a two-part series, I’m going to show you one way to use “deep in the money” LEAPs for potential profits. Let’s get right into it.

LEAPs are one my favorite strategies, and for good reason.

In fact, Bryan and I recently cashed in big winners using this exact method.

One win was on Carrier in Catalyst Cashouts for a 39.8% gain in 82 days. Another was a 28% gain on Devon Energy (DVN) in 29 days in The War Room.

Now, I’m going to show you how my deep in the money LEAPs strategy allows you to use leverage, lower your risk, and still gain exposure to the price movement.

Why I use LEAP options

Leap options are long-term equity anticipation securities. Essentially, they are options contracts with expiration dates longer than one year. Here are a few reasons to consider them for your own trading.

1. Long-Term Investment: LEAPs allow investors to take a long-term position on a stock’s price movement without committing a significant amount of capital upfront.
2. Reduced Risk: Compared to buying or shorting the underlying stock, LEAP options typically require less capital, which can help reduce overall risk.
3. Leverage: Options provide leverage, meaning investors can control a larger position with a smaller amount of capital. This leverage can amplify gains if the trade moves in the expected direction.
4. Flexibility: LEAP options offer flexibility in terms of timing. Investors have the right, but not the obligation, to exercise the option anytime before expiration, giving them the ability to adjust their positions based on market conditions.
5. Hedging: Investors can use LEAP options to hedge their existing positions in the underlying stock, providing downside protection or generating income through covered call strategies.

Overall, LEAP options can be a useful tool for investors looking to capitalize on long-term trends in the stock market while managing risk and maintaining flexibility in their investment approach.

How my “Deep in the Money LEAPs” Strategy Works… Deep in the money options refer to options contracts where the strike price is significantly below (for call options) or above (for put options) the current market price of the underlying asset.

For call options, if the stock price is well above the strike price, the call option is considered “deep in the money.”

For put options, if the stock price is well below the strike price, the put option is considered “deep in the money.”

These options tend to have higher premiums because they have intrinsic value (the difference between the strike price and the current market price of the underlying asset). Traders may use deep in the money options for various reasons, including:

1. Leverage: Deep in the money options allow traders to control a larger position in the underlying asset with a smaller investment.
2. Lower Risk: Because deep in the money options have intrinsic value, they are less affected by changes in the underlying asset’s price compared to at-the-money or out-of-the-money options.
3. Capital Efficiency: Traders can gain exposure to the price movement of the underlying asset without tying up as much capital as they would if they were to buy or short the stock directly.

However, deep in the money options also have their drawbacks, including higher upfront costs and lower potential returns compared to options that are closer to being at-the-money.

But, in my experience, deep in the money LEAPS provide a proxy for the same underlying stock and give me up to three years of time to be right, depending on the expiration date. It also gets me in with a lot less capital. So, this is a strategy that is more akin to investing in stocks than in options.

YOUR ACTION PLAN

To follow along with my LEAPs trades in real time, I invite you to check out Bryan and I in The War Room. Right now we’re guaranteeing you’ll receive 252 winning trades in your first 12 months of membership.

Click here to unlock The War Room today.