How I’d Invest With $1,000 Using LEAPS Options (Complete Guide) transcript

If you're starting with $1,000 or even $50,000, one of the biggest challenges is figuring out how to use your capital efficiently without taking on unnecessary risk. And that's where this strategy becomes really interesting. Today, I'm going to be covering a step-by-step guide on LEAP options and how I would be using this strategy to grow to my portfolio level if I were starting from scratch. Again, I'm going to be showing you all fundamentals as well as how to manage, open, and close the strategy.

It's something that many large investors use to manage exposure, plan entries, and stay disciplined. But most retail traders either over complicate it, misuse it, or avoid it completely because they don't understand just how it works. So, in this video, I'm going to break it down in a simple way, show you the risks, which is very important, show you the benefits, and help you understand when this strategy makes sense to use and implement within your portfolio as a growth strategy.

I'll show you how I personally use LEAPS as a stock replacement strategy as well. Because LEAPS are actually a really smart way to have exposure into a stock without really having to need the capital to really buy a stock. I'm going to show you an example later on where a position might cost 50K if you were buying stock, but if you buy a LEAP option, it's only going to cost 10K. So, it's a huge reduction in terms of capital cost that you have to put up whenever you're using LEAP options.

And LEAP options give you control of 100 shares. That's what makes them so amazing. So, everything is broken down step by step. So, you can actually apply this in 10 organized chapters that you can see on the screen right now. First, we're going to build the foundation. What leap options actually are, why they're different from short-term options, and why I view them as a stock replacement strategy. Then, we'll cover the most important concept in the entire course, delta, because this is what determines whether your LEAP option behaves like a stock position or if it really behaves more like a risky lottery ticket.

And that's what you definitely don't want. After that, I'll show you how to choose the right strike price, the right expiration, avoid time decay mistakes, and understand implied volatility. And lastly, I will show you how to manage risk properly and real life examples of leap positions that I'm opening up in my personal portfolio. My mentor used to say, "The problem isn't using leverage, it's understanding it." And that's exactly why most people lose money with options.

They mishandle position size, stock selection, delta decay, and overall strategy risk. Quick disclaimer before we jump in. This isn't financial advice. I'm not registered or licensed, and I'm just breaking this information down for educational purposes only. Now, with that out of the way, here are my personal results of leap options. I've been running this strategy for almost a decade now, and I've had really good results, and I've also made really big mistakes that I hope I can help you not make yourself.

So, let's start with the most important question first. What exactly is a LEAP, and how do you implement the strategy? A LEAP is a call option. It benefits when the stock rises. And back in 2018, my mentor essentially made money on one single position. And I thought that was gambling. I thought I was just taking crazy risk and that there's just no way that it can, you know, be something that another investor can duplicate.

But when he explained it to me, I really understood that there was strategy behind his results. So it wasn't really gambling, but it was strategic positioning by structuring the trade correctly and giving it time. He was using Apple. This was a while ago, so Apple was really a hot stock. It's still a really good stock with amazing returns. And what he did on Apple was later what I personally implemented with Tesla in my own portfolio.

And if you guys are new to my channel, my name is Henry. I worked at Goldman Sachs and I grew my portfolio to $4 million. And along the way, I used Tesla. I was using LEAP options on Tesla. Now Tesla's a riskier stock and had a lot of volatility. And a LEAP option greatly benefits when there is a lot of volatility, specifically also when there's a lot of high momentum. So any momentum driven stock, which a lot of you guys on YouTube are searching up, any growth stock, a LEAP strategy can really give you some magnitude to any single trade.

Now, we'll talk about the risks as well because there's definitely risk to LEAP options. So a LEAP is simply a long-term option contract. Usually with an expiration from 9 months all the way to even 2 years out, instead of buying a 100 shares of a stock, you're buying the right to control those shares over a longer period of time. And this is where it gets really interesting because if you structure it correctly, a LEAP can behave very very similar to just owning stock but with a significant less capital upfront investment.

So for example, instead of putting up $50,000 into shares, you might control the same $50,000 with 10 to $15,000 worth of capital or even $25,000. That's still good using a LEAP option. That way you don't have to have as big of a portfolio to scale if you're starting out as a beginner or even if you're an intermediate investor. That's why institutions use LEAP options, not to gamble, but to create efficient exposure while managing capital.

So, full disclaimer, a LEAP uses less capital, but it's technically more risky if the stock ends up going down. It's kind of like a mortgage on a house. You put up a down payment and you own a much more expensive asset. If the asset falls, you lose money very quickly. If it rises, your small capital rises a lot because you're controlling this big, massive asset. That's how you make bicep over tricep money. That's how you really grow a portfolio.

That's how a more growth centered investor really thinks about growing that portfolio. This is why later in this course, I will show you how to structure a LEAP option and manage it. So, a LEAP is a long-term call option on a stock. This is simple, but not all LEAPS behave the same way. So, how does a LEAP act like a stock? This is really critical. Some LEAPS will move almost exactly like the stock will, and others barely move at all, even if you're right on direction.

That difference comes down to one concept. It's the most important concept in this entire strategy. Delta. So before we talk about strikes, expirations, or anything else, you need to understand how your position actually reacts when the stock moves. Delta is exactly what determines that. Think of it like this. If a LEAP has a 0.8 delta or 80 delta, it will move 80 cents for every $1 move in the stock. So instead of owning 100 shares, you're essentially getting the behavior of 80 shares.

That's why some leaps feel so powerful. They actually move like the stock would move because they have 80% of that movement, but the cost could be half 1/4 depending on what you pay for the premium. And other LEAP options may feel really slow because their delta is just too low. And we'll talk about the mistakes of really low delta and out-of-the-oney options. Now, this is where most beginners go wrong. They will buy cheaper out- of-the- money leaps thinking that they're getting more leverage.

But in reality, those contracts have very low delta. So even if the stock does move in their favor, the option has little to no change. Out of the money options usually expire worthless. So buying them is dangerous because options expire out of money. You're able to lose all the capital that you pay in terms of premium to buy that option. On the other hand, deeper in the money leaps have higher delta, which means they behave much closer to how the stock would itself, giving you more consistent exposure.

In fact, once you finish this course, you may not really want to buy stocks anymore at all. Let's go over a real example using SoFi stock and Netflix stock, and I'm going to display to you what deep inthe-money LEAP options look like versus out ofthe- money options. All right, so the position that I want to go over right now and show you what an in the money option looks like. We're actually going to use AMD and then I'll cover SoFi and Netflix as well.

But AMD is a current position that I have a LEAP option on. It's a $200 call option on AMD and I ended up buying this in January. So I was having a program that I was running and I told my students that this is a position that we're going to get into. This was on January 5th. Now the option that you see on the screen right now expires on September 18th. So, when I opened this option, it was roughly a 9-month to expiry option.

Now, technically, a LEAP option is a one-year option. However, I consider a 9-month option a LEAP option as well because it basically functions very similar to what a LEAP option would. It gives you that long-term exposure. It gives you that capital efficiency, and there's plenty of time before theta really kicks in. Theta is what hurts the option. It's as time goes on, the option decays in value, and that's what is known as theta.

So, this option right here, the AMD 200 call option that I'm up $11,000 on is in the money. It's actually deep in the money. The reason why it's deep in the money is because the current value of AMD, as I'm making this video, is $356 per share. If you're watching this video in the future, that's perfectly fine. I just want to give you the education tools that you can use for your own portfolio, even way into the future, so you can just improve your investing skills and just learn from me.

Now, AMD, $356 per share. This strike price on AMD is $200. So, I'm in the money by over $150. Now, if we scroll down here, I want to show you what the delta is. The delta here is 94. Extremely extremely high delta. Now, this delta is already so high that basically whenever AMD goes up a dollar, my leap option goes up by 94. So, if AMD were to go from 357 to say 367, up $10, then my option would go up $9.50 basically.

So, very, very similar movement. However, keep in mind if you own 100 shares of AMD, that's $356 per share. That means that you have to have $35,600 to own 100 shares. So, if it goes up $10, you can see on the screen right now, $10 divided by $356, that's the return, right? So, if AMD goes up about $10 exactly, then that performance is roughly 3%. Right? However, if AMD leap option that you purchase goes up by $9.50, now let's do the math for the LEAP option. $9.50 increase now is going to be divided by the cost of the LEAP.

Now, the cost of the LEAP is only $164, which means that the capital required is $16,000. So, instead of having to pay $35,600, you only have to purchase the LEAP option in this example for $16,000. So, when AMD stock goes up by 10 bucks, this leap option gains $9.50. Dividing $9.50 50 by $16,400 you get this return. So this return that we get from the LEAP option is greater than as a percentage return versus the stock itself.

And again the reason is because there's leverage. A LEAP option does not need to use the same amount of capital. Now this is a really deep in the money leap option. Let's go over another example. I'm going to show you an example on SoFi and we're going to look at a SoFi leap option. So, SoFi is down a lot over the last 3 months. It's down 27%. Years to date is down 38%. Um, so let's just say that we want to bet on SoFi to recover.

So, so you can go to trade trade options. And now what we're going to look for is an in the money, deep in the money to be specific option that is a LEAP. So, we're going to go out to a future expiry. And again, 9 months is okay. One year is really, you know, what a LEAP option is. So I'm going to go for June 17, 2027 as an expiry date. Now if I go to buy call option, what I want to look for is a delta that's around.7.

That is a sweet spot delta that you want to use whenever you're buying a LEAP option. The reason is because whenever you look at a LEAP option that has an extremely high delta, that LEAP option is going to be really expensive. So for example, if I go down to the 10 call option, this delta is86, but you're kind of getting diminishing returns here because you are now paying $8 to buy this LEAP option. However, the 15 call option is only going to cost you $5.

So, it's a lot cheaper compared to just buying super deep in the money call options. So, here is kind of like the sweet spot because it's still in the money. It's 70 delta and you have a lot of good exposure without having to really overpay. So, here if I go into this 15 call option and I click it, you will see that there is a bid of $5.20 and an ask of $5.30. The delta is 70. And if I were to buy this option, essentially what would happen is that the 15 call option is going to cost $5.

That means I get to control 100 shares for just $5. This $5 helps me control basically $1,600 worth of SoFi because 100 shares would be $1,600. So if I click this option right here, my break even price is $20.25. Now, keep in mind this means that if I were to hold this option until expiry that I would need SoFi to be $20.25 25 cents just to break even. However, as we will cover later on in this course, it's very important to actually not hold a LEAP option up until expiry.

The reason is because in the last month two or three, Theta really starts to kick in and eat away at your options value. So, in a majority of situations, I do not hold my LEAPS up until expiry, but we'll talk about that later. The whole point here is a deep in the money option like this one that we're looking on the screen right now, a 15 call option that's worth $5. This is basically an optimal setup for a LEAP option. if you think the stock can recover.

So let's say that SoFi can go to $25 per share by, you know, June or a little bit before then, let's say March 2027. So as it approaches 25 or $30 per share, this LEAP option is going to gain value. If SoFi stands the same, then at first nothing is really going to happen because a LEAP option has very low time decay, meaning that doesn't really lose that much value at first. So there is a lot of benefit to a leap option because you have time to hold this leap option and see if your thesis on the underlying stock is going to play out or not.

If it doesn't play out in the first, you know, few months, then you can end up just cutting the position for very minimal losses. Okay, we'll talk a lot more about this later on after I cover more details on the leap strategy. But that's SoFi. Let's go into Netflix. Netflix is also, you know, a pretty interesting stock, but you know, this course is not about specific stocks. It's more around how to use this strategy.

You know, I used to work at Goldman Sachs. I've scaled my portfolio and I've learned a lot of things along the way. I made a lot of mistakes and leap options are definitely one of those more powerful strategies which if you do them incorrectly, you can lose a ton of money. But if you do them correctly, it is a, you know, interesting way to scale a portfolio. And in my experience, it has been very fruitful for me as well as my community and my students.

Now, Netflix is currently trading for $93 per share. You can see how Netflix was like $108 not that long ago. And in the one-year chart, Netflix has had, you know, a good amount of volatility. So, let's just say Netflix or whatever stock you think is going to come back to, you know, a more recent 52- week high or peak level. So, you know, for Netflix is 133. So, then you can also do a deep in the money option, right?

That's the whole point of this course. However, let me show you what can go wrong if you do an out-of-the-oney option. Okay? So, again, keep in mind Netflix going to 133. Keep that number in mind. Okay? 133. Okay? I want to show you how buying an out- of-the- money option can still be unsuccessful even if the stock goes up back to like some big level. Right? So 133 would be really really nice. That's a really huge increase in Netflix, right?

From 93 to like 133. That's basically like 40%. If I'm correct, right? So whatever I'm going to put that math on the screen right now. That's a huge return that is very unlikely to happen in a especially in a short amount of time. Right? Stocks don't usually rise that much in a short amount of time. But let's just say that our belief is that that can happen. Okay? So, I'm going to show you how even if something really good happens, you can still lose money on a leap option if you don't set up correctly.

Let's go to trade options and then let's go for let's just do the same June 17, 2027 now again. So, let's say that we're going to buy an out- of the money option and we're going to go to 130. Okay? So, we're going to bet on 130. The delta here is 28, which is, by the way, not too terrible. 28 delta means there's a 28% chance of this option expiring in the money. So if it, you know, goes to 130, that's basically almost a 30% chance of happening. 28% chance to be exact.

However, look, our break even is 135. So even if Netflix goes to $33 per share, which again is, you know, a massive return that's not that likely to happen in majority of cases, right? Let's not speak about this specific case. Broadly speaking, a stock won't make that huge of a rise on a consistent basis, right? Otherwise, investing would be too easy. Hey, it's not too easy, right? It takes a lot of dedication, skill, and stock market returns are typically 10%.

So, if you can get 20, 30% per year, you are beating the average investor by a whole lot. You're definitely beating the S&P 500 by a whole lot. And most investors just don't do that. And the biggest mistake is just buying out of the money call options. So, thinking that this is cheaper and yeah, it's a lot cheaper to buy a 130 call. It's $5.60, right? Versus if you were to buy a deep in the money option. So, that would be like the 85 strike price here, right?

Delta 70. However, the cost is like four times more. It's $22.50. That's a lot more expensive. But this is like night and day in terms of like the performance that the LEAP option kind of gives an investor as a stock rises. You know, as a stock goes up a dollar, this call option right here benefits by.7 versus the other one that we're like looking at right now, the 130 only benefits by 28. Now, as a percentage return, that's pretty big.

But the decay is going to be just so massive here. So, let's look at the decay, theta decay. So the Greeks on the bottom, these are important uh variables and they basically explain how the behavior of an option really works. So delta is how much the option changes. But there's another definition of delta which I just mentioned. It's basically the chances that the option will expire in the money meaning like how likely is it to get to that level at all like just to be at that level.

So that's delta and it's really important. We'll mention more about this as I go through more examples but theta here is 0.0168 0168, which basically since each option is 100 shares, this means that this option is losing $1.68 per day. Doesn't seem like a lot, right? But, you know, it's kind of a lot considering that this option has such a long time to expire and it's already losing that much per day and the value of the LEAP is only five bucks.

So, as a percentage return, you're losing a lot on this 130. However, if I go down to 85, I want to show you kind of the difference here. So, the difference here is that you are losing $2.13. However, the amount that you have to put up for this leap is so different. It's four times more expensive. So, you're losing just a little bit more dollars, but as a percentage return, as a percentage of loss, it's very, very low.

So, although it's a little bit bigger, in terms of overall efficiency, it is way way better in terms of overall efficiency. Also keep in mind whenever you buy a deep in the money option, it already has some intrinsic value. We'll talk about intrinsic value. I'm giving you guys a lot within this one example, but I'll I'll give you more information on why an in the money option also has other advantages. So let's talk about intrinsic value.

Intrinsic value is the real value an option has right now. So as I just showed you in that example, an 85 call option or LEAP option on Netflix already has value today. The reason why it has value right now is because Netflix is sitting at 93 and that call option is at 85. So the value intrinsically is already $8. If nothing happens, it's 8 bucks. Whereas the other option that's at 130, which is out of the money, has absolutely no intrinsic value at all.

It's not worth anything. The only reason it's even worth the $5.30 that we saw is because it has something called exttrinsic value. Right? Intrinsic value is how much this option is in the money right this second. Extrinsic value on the other hand is everything else. Time value, expectations in the future, and volatility. This is the part of the option that decays over time. It's not intrinsic value that decays because it's intrinsically worth something.

So that's not really decaying. What's decaying is all that time, all the possibilities, all the, you know, potential that is decaying. As the option approaches expiration, if it's not moving towards the strike price or if it's not moving higher, all that time value, it's going to decay and be less valuable. For example, if we look at a really awesome stock that I personally like, Nvidia, and let's say it's at $200 per share, which that's roughly the price.

If you were to guess kind of in the next 6 months, where could Nvidia be? You know, 220, 240, 250, those would be, you know, guesses, right? And that is basically one factor of time, 6 months. However, what if I said in 10 years from now, where could Nvidia be? Right? There's a whole lot more possibility. What can happen in 10 years? uh you know, autonomous robots and all kinds of other inventions and technologies and AI continuing to just grow to the point where none of us have to work potentially and just whatever.

There's lots of crazy things that can happen in 10 years, right? So the value of Nvidia might be 500, 1,000. It's possible. It's possible because there's so much more time that time is a really huge variable. That time variable really makes up all that exttrinsic value that you know options have. So this is the key insight. The more intrinsic value your LEAP has, the more it behaves like stock, the more exttrinsic value it has, the more it behaves like a trade that needs to be right quickly.

If it's not right quickly within that time frame, you have a huge risk. Maybe you will lose all the money that you put up for that option position. So, one has value now and the other only has opportunity to become valuable in the future if the stock rises. Now, if you're right about a rise in a quick short amount of time, then yes, you can make a bunch of money on out of the money options. However, that's not my style.

That's not what I teach, and that's not how I personally became successful. I became successful by strategically looking at in the money options and trying to basically use it as a strategy to replace stock. That's why in this strategy, we typically favor a deep in the money leap as it has more capital requirement, but it behaves much more similar to a stock. And as I show you later, it's also much easier to manage that type of position versus an out- of-the- money option.

Now, because you're minimizing decay and maximizing the value that you already have, that's also going to help you a lot in terms of draw down risk. Because what happens is if the stock goes down, leap options lose value. The LEAP options out of the money, there's no value that even had intrinsically. So, you just lose everything. However, with an in the money option, if it goes down to a certain level, you can just place a stop-loss order and you you can end up losing but recouping about half of the loss, for example.

So, later on this course, I'll show you kind of how to manage that type of situation because it is case by case. There's a lot of risk involved with LEAPS. But overall, in a bullish market, which is most of the time we are in a bullish market, especially over longer periods of time, the LEAP strategy can outperform significantly. Now, let's move over to the third chapter of this course, which is going to be contract selection.

This is where a lot of investors fail. The best setup in my opinion is an expiration selection of 9 months to 18 months. 2 years is a kind of a long time period. 9 months is a level where you have enough time and it's not too short where time decay is really kind of eating away at your option. Technically, again, a leap is a one-year option, but I consider 9 months close enough because theta and time decay does not eat into the option at that point.

So, that's the time frame for expiration. Now, let's discuss strike selection. I personally love 70 delta which is a deep in the money leap option. Deep in the money options are safer because most of what you're buying is real value not hope. Deep in the money equals mostly intrinsic value. Now it doesn't have to be massive intrinsic value as long as it has some value and a high delta because that's the formula for stock replacement.

A lot of investors they're you know buying shares doing covered calls and they're doing more capital intensive strategies. Now, it's fine if you have a big portfolio, but if you are someone that has a smaller portfolio or a medium portfolio and you're looking for growth, well, something like the wheel strategy or covered calls and selling puts, they're good strategies, but they're definitely not the type of strategy, you really get that massive growth in place.

So, this is how you get the upside in close movement to a strategy like owning just regular stock. But with the LEAP option where you have to put up a lot less capital. Now, the only thing that can really like destroy your returns is data. data only destroys exttrinsic value as we discussed not intrinsic value. So, as time goes on, your option controls 100 shares and it's really not decaying in value very much, especially in the first few months.

But as we approach the later 3 months, that's where the option can really decay in value, especially if it's not really that much in the money, right? The example that I showed you on Netflix where I do an 85 call option and Netflix is at 93. That's $8 in value. That's good. That's in the money. But it's not like AMD which I have a 200 call option and AMD is at 350 360. That's a very different position because one has intrinsic value of 8 bucks.

Another one has $150 worth of intrinsic value. So of course the higher intrinsic value that you have basically the safer you are to stay within that zone. Now deep in the money leaps don't need the stock to move fast like a really risky short-term call option would. They have a long expiration. So you really get to have the stock-like return. Let's go over another example of a LEAP option that I currently have in my portfolio.

This is going to be on Meta. Meta recently had earnings. The stock went down, and my current LEAP option is actually a $600 call option that expires on January in 2027. Now, this option is still in the money, but it did lose a lot of value. You can see here how I am down personally $4,000 on this position. I'm down 31%. Yet, before earnings, this company was doing really well, but met a dropped after earnings. And that's fine. earnings can sometimes drop companies.

So, this leap option looks a lot less attractive after Meta ended up falling. In fact, you can see here the value of my LEAP option, how much it actually dropped. I should have actually cut this position and I should have taken profit. This is probably a mistake on my end because Meta, the $600 call option was worth $133, even $140, you know, $140. So this position which you can see here I ended up buying let's see meta break even price current Meta price market value current price average cost.

So I have it at an average cost of actually 131. So I paid pretty handsomely for it. However you can see that the value was at 140. And this was you know not that high of a return. Let's go to the one month here. The value was basically as high as 148. So I haven't really had a chance to even make a decent profit on this position. I wouldn't really take profit off of a position that I bought for 130 and now it's at 148.

That's just not enough. My typical exit point, what I like to set is about 50%. So if I buy a LEAP option for 130 and now it's worth, you know, 50% more, which would be about $65, which would be $195 total, that's a good exit point. That is a point that I would want to take an exit. Um, so this option was very deep in the money. Now the delta is 62, which is pretty good still. 70 is really the sweet spot. So 62 is kind of on the lower end.

However, the lower end is still not an issue. I'm still in the money on this LEAP option. And because this sleep option expires in January 2027, I still have a lot of time. Theta is really low on this option. And I want to click simulate my return because uh now I can show you kind of different situations, situational um scenarios that can happen to this leap option and when I would, you know, take profit, when I would look at delta.

So first of all, delta is at 62 right now. Again, that means if Meta stock goes up by a dollar, this option goes up by 62. So here's kind of some scenario analysis. What would I do? Well, right now Meta is at $612. Pretty low in terms of performance. However, let's say that in next earnings quarter, which is 3 months, right? From now until then, not a whole lot happens, but you know, it inches closer to 650. So, you can see here as I change the price, then my simulated return here would continue to increase in value, right?

I'm losing 4K and now I would only be losing um, you know, a lot less. So, let's go to 650. Let's actually enter the price to make it a little faster. No, let's actually swipe here. I don't know how to enter the price. So, let's go to 650. Okay, here we go. About 6 650, right? So, I'd still be down on this position just because, you know, I bought it for an expensive price. So, this was this is an example of me managing this position to my best ability.

Met is down, but I'm still bullish. So, that's why I'm not cutting this position. Theoretically, a lot of people would, you know, think about getting out. However, if the underlying stock is still good, then you can continue to hold your LEAP option in place. There's no reason to change a LEAP option just because a stock is not going in your direction within a short amount of time. Again, a leap option is has time. That is one of the benefits of a LEAP option.

So, in terms of managing this type of strategy, you don't have to be too strict in day-to-day stuff. You don't have to do that. This is much more of a kind of wait andsee strategy. As long as the stock ends up moving in your direction, your thesis ends up playing out at some point before expiry, then you can you can have a profit. So, for example, let me show you. All right. So, let's say now that Meta ends up shooting to $700 per share.

Okay? You can see this graph is going to continue to change. You see how it goes up. So today if it went up to $700 per share suddenly this fast then I would be up right but obviously that's really difficult to do. However I want you to pay attention to this chart because is if it went up to 700 even by you know July I would still be up on this position. So on July 9th if you know Meta went up to $700 I'd be up on the position.

However let's say that earnings came in really really good and Meta jumps to like $800 per share right? So let's go to 800. I'm going to scroll here. I apologize. Trying to be as efficient as possible here. I really respect your guys' time. Hey, let's just say 780. Okay. As time goes on, this value would still decrease, right? Because all this value right here is still some exttrinsic value. Some of it is time. But now at expiry, I don't really have to worry cuz I'm so deep in the money.

But I wouldn't hold it because you see here, if it stays at 780, it just continues to decay very, very quickly. At this point, the slope is very kind of steep here. However, here it's not so steep. It's losing value, but very very slightly. So 3 months from, you know, today we're somewhere in May. So June, July, August. So in August, which is where I'm at, funny enough, August 12th, if it hits 780, I'm going to be out of this position.

I'll take 6,900 for sure in terms of a gain, and I'll be happy with that. So you know, it it is very situational. The exit points that you want to aim for is typically 30, 50, 75. A lot of it is also based off a technical analysis, which I'll show you later, but I'll give you a quick summary to give you as much value as quickly as possible. If the stock is going up and the RSI is not above 70, then there's a good chance that the stock's momentum can continue.

If the RSI is very high, that's typically more resistance. That's one of the indicators I look for in terms of shorter term momentum. I'm not a momentum trader. I'm not a short-term trader, but it is a factor that I take into consideration. The other factor is Ballinger band. If the stock goes towards the top of its bowlinger band, that's also an interesting time to really consider taking profit from your LEAP option.

We'll go over Bowlinger band a little bit later. Now let's talk about another important factor within this course. In addition to strike and expiration selection, it's very important to select the right stock. Of course, this changes with time in the market. If you select the wrong stock, nothing can help you. No strategy is going to help you if the stock declines because a LEAP option is a bullish strategy. If you select a very good stock, then you can even have some leeway room on not choosing the best delta because if the stock goes up, pretty much a majority of LEAP options will be benefiting.

Even out of the money leap options will have a shorterterm benefit if the stock ends up going upwards. Now, of course, stock selection really changes with the course of time as well as market conditions. If you want trades on LEAPS that I personally hand select and research, then you can see my new leaps mastery group that I launched only for this specific video for those that are still watching at this point in the video.

You can check out the description for more details. This is basically like treasure because I do not have this group in any other video on YouTube. only in this one. I'll talk about that more. Let's get back into more valuepacked information. Let's cover some more common mistakes to make sure that you're not falling into dangerous habits and so you also understand more advanced topics within contract selection. Now, one of the biggest mistakes is just not buying enough time.

Again, having that short-term tendency, having that gamblers mindset, having that really, you know, I want to get rich quick type of mentality. That is the wrong mentality. That's not the type of person that I personally want to work with. And I don't believe that, you know, getting rich quick is even possible. It's really difficult unless you get lucky. Now, what I'm trying to do is I'm trying to replicate success without getting lucky.

So, when I see a lot of traders that go 3 to 6 months and, you know, they're trying to save money and ends up biting them in the, you know, you knowhere, right? So, that's not a leap option. That is just a short-term riskier trade. That's a trade that needs to be right quickly. Now, time is what gives you margin for error. When you have more time, you have a greater margin of error. Without enough time, even a good idea, it may lose money.

Even some of the best stocks, they don't always have the best short-term windows of good performance within one or two or 3 months. But many good companies that report good earnings, have solid momentum, have good, you know, investors that have a, you know, cultlike following to that stock. They believe in that stock, management continues to guide forward, companies doing good things, then more likely that stock is going to go up.

But it may need more of a time. But it may need 6 months, 9 months or one and a half years, right? And a leap option gives you that advantage. Now the other mistake that I see is really around events and timing. Buying leaps during hype times or you know really tough political news or right before earnings can really have inflated prices. Even if the stock goes up, volatility can drop and cancel out all of your gains.

So you can be right on direction, but you can still lose money. That's a very frustrating mistake to make. The other mistake is position sizing. just having way too much in one single position. That's what I call bad risk management. Leaps use less capital upfront, which can lead to oversized positions. Despite being long-term, they still involve leverage and risk. If a stock does not move higher, the leap can lose money.

Large positions increase downside impact if the stock declines. Now, holding too long is the other mistake that I see happening like literally all the time. A lot of investors has become so married to their position that they forget that there could be a fundamental change in the company or just simply time to take profit and they end up getting way too greedy. And we will talk about holding period and managing strategy again when I go over my live example.

Here's a quick summary if you made it this far. I want you to just have a full deep understanding before we move into the next chapter. Time TK accelerates as expiration approaches. In the final months, the option becomes more sensitive to time. Managing or exiting before that phase helps preserve value. Last, buying cheap out- of- the money leap options is, you know, attractive for a new investor. They think there's a ton of money to be made.

But a lot of people go for the cheap contracts thinking they're going to be, you know, getting a lot of leverage, but what ends up happening is most options just expire worthless. So these investors just end up losing money. So these contracts usually just have low delta and are made up almost entirely of extrinsic value of possibilities, what may happen, but no real intrinsic value. That means if the stock moves in the right direction, the option really barely responds or even if it goes up as expiration approaches, it ends up still being out of the money.

Cheap contracts often come with low probability and super high risk that isn't worth it in my experience. Even if the stock moves up, you end up losing money. Exactly like the example that I showed you on Netflix. If you buy a $130 call option, and that's basically where the worst case scenario can come in. You end up losing everything that you paid for the option. Now, my goal is to teach and educate you so you have proper position sizing. you don't risk too much on any one single position and that leaps end up being a powerful strategy for you to use on ideas that you already like within the stock market.

So my final rule set is go for delta that's around 70 or you know up to 80 time frame between 9 to 12 months as really that sweet spot time frame strong underlying stocks that you really like and that you want to own and then the goal is to exit the trade before it gets into the final 60 to 90 days where theta starts kicking in a lot more. All right, let's get into the fourth chapter, which is theta and time decay. In this chapter, I'm going to show you how to manage a leap position that you are already in.

Leaps decay slowly in the beginning, but that decay accelerates towards the end. When you buy a longdated option, you are buying a large amount of time and that time doesn't lose value evenly. It does not happen in a linear process. Early in the life of a leap, the time value is spread out over many months. In that early phase, it could decay maybe, you know, let's say in the first 30% of time, it may only decay 10% of the value.

In the last 30% of time, it may decay 50 or 60% of the value. So, there's a skewed amount of value that a LEAP option loses with more of it on the back end. So, each day that passes, that only removes a small portion of the value at first. Think of it like this. Losing one day out of 400 days is almost nothing, but losing one day out of 30 days matters a lot more. That's why LEAPS feel stable early on. There's simply too much time left for decay to have a meaningful impact day-to-day.

And that's where a LEAP option is really the most powerful. And as it approaches towards expiration, that's when you should be taking profit or just cutting the position for a loss if it's down. My management plan is to evaluate the option at the halfway mark and make a decision at the 6-month mark to either, you know, cut the position for a gain, give up on the position, or to actually even double down on the position.

The six-month mark is a really awesome time to basically make a decision because it's the halfway mark and this is where a lot of the time decay actually starts to shift. At that point, you're removing a large portion of uncertainty if you end up getting out of the position. However, if you continue to stay in the position and momentum continues to go in your favor, that's a great time to continue to profit as well. You really want to take guessing out of the equation when you're looking at managing the strategy.

You want to take guesswork out of it. You want to understand the direction. And again, that is going to come down to momentum factors, RSI, Bowlinger band, and more technical indicators that I'm about to go into. Chapter five, implied volatility. This is really the hidden edge. Applied volatility determines how expensive your option is independent of the stock price. When volatility is high, options are priced higher.

When volatility is low, options are cheaper. There are two factors. IV expansion. This is basically when there is an increase in the option value because IV is going up. Or IV contraction, where there is a decrease in option values. If you buy a LEAP during low volatility and it expands, you benefit from both the stock movement and the pricing of the stock going up in terms of the option value being more valuable since there's higher implied volatility.

More risk. Higher risk means higher pricing. If you buy during high volatility and it contracts, it can reduce or offset your gains. This is where many traders make a mistake. They buy leaps when there's a lot of volatility and it's already elevated. So often during hype, strong rallies or major events, they end up overpaying. They're buying LEAP options because they're excited. They're, you know, have so much enthusiasm because the market's doing good and they feel richer.

But that's not a good time because when volatility is high, options are expensive. Now, earnings are the clearest example. Before earnings, volatility increases due to uncertainty. After earnings, that uncertainty is removed and volatility ends up dropping. This drop is known as IV crush. Even if the stock moves in the right direction, that contraction can limit gains or create losses. For LEAPS, this matters less than short-term options because this factor within the Greeks doesn't affect it as much.

What really affects a LEAP option is the stock movement itself, which again goes back to the point, it is a good stock replacement strategy because the LEAP option isn't affected too much by outside factors because you're holding a large position over time. Paying too much upfront though can reduce or even kill your overall return. The best situation for an option trader is what I will call double tailwind. If you own an asset like a LEAP option which benefits from upside growth in the stock, a double tailwind is when you have a rise in the stock market pushing the value of your LEAP option higher and an increase in volatility which also raises the options premium at the same time.

This powerful combo explodes the value of a LEAP option. This is because you have an increase in value from an appreciating market and greater volatility also makes the option more valuable. Chapter six, risk management. This is what really separates a beginner investor who makes a ton of mistakes from a more seasoned investor who really understands how to limit their downside risk. Most people focus on finding the right stocks.

But what actually determines your outcome is how you manage each and every position that you hold. All right, guys. Let's go over the simple risk management guide within this leaps strategy course. So, I want to give you the most powerful techniques that have helped me manage leap options and also protect myself because risk management is incredibly important. Most traders focus on returns, but professionals really focus on risk.

And you can survive being wrong, but you cannot survive blowing up your entire account, right? We can be wrong. We're not going to have a 100% win rate. That's just not possible. So, the goal is not to always maximize gains. The goal is actually to maximize longevity. So, if you can do leap options on a long-term basis throughout the years, then you have a very good chance of building long-term wealth. However, if you end up blowing up your account, you end up kind of quitting this game, then you're you're a loser, right?

So, my goal here is to help you have longevity in trading options. I want you to be able to do this for the next many years and decades into your retirement, right? And the way to do that is really to protect your downside, to manage risk. And a great trader with poor risk management, even he will lose, right? I'm telling you, even the smartest people in the whole world with fancy degrees from MIT and Harvard, Stanford, etc., even if they don't manage risk properly, they will end up losing.

So, I really want to put you in the mindset that everything that I cover in this course is very important, but risk management is incredibly important because risk management is what allows compounding to really work, right? Warren Buffett says, "Rule number one, don't lose money." And rule number two is follow rule number one. So, I really want you to understand that risk management is what allows compounding to work. and one bad decision can erase literally years of gains.

Every position should have a plan before it's entered. Right? So, let's go back here to the Amazon example that I did before. Okay, I have the 225 leap option here open. And if Amazon continues to go down here, then I need to make a risk management decision to potentially cut this. So, if Amazon goes below 225, very simply, that is a point where I would cut this for a loss, right? because I don't want it to go to being an in the money option with a delta.7 to becoming an out- of-the- money option with a delta under 50.

That's one of the most important risk management principles that I personally use is if it goes to an out ofthe- money option from clearly leaps being in the money the way that I do them and it becomes out of the money then hey I'm looking to kind of get out here because I want compounding to work. I don't want to lose money on a consistent basis. I want to make money on a consistent basis and every position that I enter has a strategy when I enter it.

And one of the most important strategies that I have is that the option becomes an out-of-the money option. Then, hey, I'm going to cut the option before it loses anymore. Never enter a trade without knowing what your exit point is. Okay? Because if the stock breaks down, which inevitably it will, often times stocks do break down, crashes do occur in the market, you want to have proper position sizing. So, let's talk about position sizing.

Position sizing really matters and it matters as much as stock selection. Even the best stocks can become a terrible investment if your position is just too large. Let's kind of go over an example here. Let's say you're investor A. We're going to talk about investor A here. And let's say that you have a $100,000 account and you end up putting $8,000 in one LEAP position. That's already 8% of your portfolio. And that's not crazy.

I think up to 10% is okay, but 8% is not little. So, if it falls down by 50%, then you end up losing 4% of your entire account. The much better situation that you can be is becoming investor B. So, let's say you have a $100,000 account and you end up buying one LEAP option for $2,000. Now, if it falls by 50%, you're down $1,000. You cut your position. That's still good because you only lost 1% of your total account value.

Okay? So, I want you to understand to never marry a stock. Great companies can still be bad investments. Stocks do not know that you own them. Okay? They can come crashing down. Even good companies come crashing down. So, I don't I don't want you to fall in love with the wrong position. Okay? Respect price action. Really respect price action. That's something that I learned at Goldman Sachs when I was working there. I would see investors very high net worth wealthy investors falling in love with stocks and not really respecting price action and their large portfolios would lose millions of dollars.

So I really want you to understand and respect changes in price but I also want you to understand changes in fundamentals. Fundamentals is also very core to your thesis. If you want to learn fundamentals that is a very difficult topic and it depends on each individual position that you have because you can't always compare something like McDonald's to Amazon. These are two very different companies. So, you're going to want to understand if the PE ratio of McDonald's at 23 makes sense to something that has a much higher PE ratio but is higher growth.

Maybe that's Amazon or Navitas or some other AI stock. You want to compare apples to apples, which is very difficult to do when it's different industries. This is another reason I recommend that you join me in my Discord community because it is very difficult to analyze a single stock. If you do the wrong analysis on stock selection, even risk management will be very difficult to save you because if a stock goes down, obviously the LEAP option doesn't do well either.

So, respect price action, respect fundamentals, respect support levels. If a stock goes below support and it breaks down, then it's also a good time to really practice safe risk management and get out of the leap option. Now, something else that's really important is delta management. Okay, delta measures the stock's exposure. Delta changes as the stock moves. Okay, so if I go back here to let's go to Chipotle. Let's get rid of this $35 call option that we're going over example before.

Let's just look at 30. Okay, let's look at the delta here of the 30. So the delta is 6, which is going to be a little bit lower than the typical 7 that I like. Now check this out. The delta is 6. So delta measures the stock's exposure. Delta changes as the stock moves. So if Chipotle goes up, delta is going to increase. If the stock goes down, the delta will decrease. Winning positions often become larger risks because they grow in delta.

So the higher delta you have, technically you have higher exposure. And if the stock ends up coming down, you will lose money faster because of a higher delta. So monitor delta continuously as you get into higher deltas, it's also good to cut part of the position and take profit on the position because if you have 10 contracts here of Chipotle, okay, let's say you have 10 contracts, right? So 10 contracts times 6 delta, you essentially have like 600 shares worth of exposure.

The reason I'm getting at that is because 10 contracts times six is six contracts and six contracts controls 600 shares, right? But check it out. If Chipotle goes up and the price increases, now the delta becomes higher and the delta is now 7 or 08. You effectively don't have 600 shares. Now you effectively have 700 or 800 shares. So you can take some off the table. If you have 10 contracts and you end up making money and the position is up, you can cut part of the position.

So if you have 10 contracts, cut part of it, cut two contracts. Now you have eight total contracts instead of 10 and now you have taken profit and realize the gain and also reduce your overall risk. Okay? And that's what I mean by managing delta. Make sure that your delta is stable. If it's increasing, then you can cut the position and take profit from the position. Now something that I also like to do is I don't want the delta to become 50.

Okay? Because at 50 it's an at the money option. Okay? and I don't want a option to become out of the money and 50 delta is essentially when it becomes an out ofthe- money option and that's when I would practice risk management essentially cut the position for a loss it's okay to cut positions for a loss ideally of course we take profits and if good things happen we follow technical analysis and the stock ends up coming up and markets do typically rise so if we have high quality companies especially the type of companies that I'm picking my Discord community I'm very good at picking which stock is likely to rise and I've done that consistently over the last 10 years and that's how I've been successful.

As long as that continues to work and the markets continue to be more or less stable. I know there's volatility, but long-term markets do rise and leap options benefit from rises in the long term because that's what a LEAP option is. It's a long-term call option. Then more often than not, you should be in the profit taking zone, which is essentially when you're up 30 to 50%, it's a good time to take money off the table.

It's a good time to realize a profit. Now, there's also time risk. So, leaps have time decay. time is an asset until it becomes a liability. In the last one month, it becomes more of a liability. So, avoid having it in the last final months. It is not going to do you too well unless the stock moves tremendously in the last month. But then that would be basically trying to time the trade and that's difficult to time the market.

The type of strategy that I personally use in my own strategy. So, avoid having it in the last final month. And also one more thing is earnings risk. So, earnings create uncertainty. Even great companies can fall after strong reports. So, make sure that a company has reported positive earnings in the last two to three quarters if you're going to hold a LEAP option through earnings. All right, let's continue on with the course and next chapter.

Chapter seven, when to enter. When to enter a LEAP option is where a lot of your edge comes from. This will be an amazing chapter because in it, I will also add a bonus five stocks I am choosing leaps on now and how to find a similar setup even if you're watching this many months into the future after this video is released. Even with a strong stock and a well ststructured leap, bad timing can slow your returns or put you in a draw down early.

The goal is simple. Buy weakness, not strength. The only time you buy strength is when a massive value gap is present. Most beginners do the complete opposite. They wait until a stock is already moving up fast, feels strong, and looks safe. I mean, it looks safe to them. But there's a difference between looking safe and being safe. When a stock is high, many people mistaken it for the time to buy. They get all excited, but that's usually where they end up overpaying.

Exactly the point when you think it's time to buy. Have you ever been in a situation where you felt that way until you bought and the stock just went down right away or the next day? Well, instead, you want to focus on pullbacks, value gaps, and undervalued stocks. Look for support levels, a place where the stock just has tremendous support from investors, or look for a recent dip or temporary fear or selling pressure.

Another thing that I look for is margin expansion, which I will discuss soon. And lastly, look for a business that is transitioning into trends. These are moments where the stock is cheaper, sentiment is weaker, and your entry improves. I'll show you five stocks that I like leap options on right now as a bonus for making it this far in this video, where the setup is strong, and the business has a value gap. The first stock I'm going to be doing leap options is Amazon.

Brief summary before I give you the leap option play. Amazon today is really three businesses. one first you have the retail machine second you have AWS which is one of the most important cloud platforms in the entire world third you have advertising which is becoming one of Amazon's highest margin growth engines and this is why Amazon stock is so interesting right now in Q1 2026 Amazon revenue grew 17% year-over-year to $181.5 billion operating income hit 23.9 billion and AWS revenue grew 28% to 37.6 6 billion.

AWS operating income alone was $14.2 billion. That tells me Amazon is not just growing. Amazon is becoming more profitable while growing at the same time. This is the part investors miss. If retail margins keep improving, AWS keeps compounding from AI demand and advertising continues to scale, then the business will look completely different in just 2 to 3 years. Amazon could deserve a much higher valuation over time.

With Amazon, you are not buying a hype stock. You're buying one of the strongest AI, cloud, logistics, advertising, and consumer platforms in the world. The risk is simple. Amazon is spending aggressively on AI infrastructure, and Wall Street may punish the stock if spending gets too high. But if that spending turns into future AWS growth, Amazon could be one of the biggest winners of the AI infrastructure boom. So, the risk is not a big deal if you're using a LEAP option in the proper way.

All righty, guys. Let's go over an Amazon leap option. Currently, Amazon is at $240 per share in mid June as I'm recording this example. And I am up $108,000 on Amazon. But this is just a stock. What would be really interesting is a LEAP option. A LEAP option could surpass this by a lot had I had the equivalent amount of shares. In fact, I would have to put up a lot less capital. So, let me show you opening up a LEAP option from scratch here on Amazon. and the target price that I am targeting.

So also I want to show you the technical analysis on Amazon. Amazon again trading for around $240 per share. Okay. So I'm opening up the chart right now and I want to show you the bowlinger band. You can see here how Amazon has fallen down here. The market has taken a bit of a nose dive in mid June. So from late May Amazon had peaked at 273 and now on June 10th and 11th here Amazon is trading for 240 or even 238. Now the stock has fallen below the Ballinger band.

The Ballinger band is a very key level for me. I use Ballinger band all the time whenever I make option trading decisions. The Ballinger band basically tells me what trading range the stock is likely to stay within. And the Ballinger band is based off of statistics. So statistically it tells you how low or how high the stock can go based on volatility. So here we can see that it's at the bottom of the Ballinger band.

What's really interesting is that Amazon also crossed the moving average. So the moving average here has been going up, but now Amazon has crossed below the moving average, which tells me that it's also looking more like a value play at these levels. Now, the middle of the Ballinger band is 260, and the moving average is 253. I really believe that we're going to bridge this gap, and I think 260 is an and I think 260 is a reasonable price target for Amazon in the short term, and $300 is the long-term kind of price here in the next 6 to 12 months.

So, I'm going to go to trade Amazon options and I'm going to show you a leap option play and kind of my expected return. So, I'm going to use the option chain right here and show you a LEAP option that I'm taking a look at. So, I'm going to go for an expiration date that's going to go out approximately 365 days, which would be June of 2027. Now, I'm going to go buy call option and I want to buy something that's in the money.

I actually already have a 225 here. So, this is the perfect kind of example that I can show you because I already have this. Now the delta here is just slightly under 70. I typically like to go for a 70 delta. Gives you the best mix of upside and sensitivity in the option without having to go too high. So what I mean by too high is if I go down here, obviously these options have higher delta, right? This is going to have 83 delta.

And that's better in terms of if the stock goes up by 10 bucks, this option goes up by eight bucks. But look, look at the price. Look at the premium here. you have to pay $76 versus if I go for something like $225, it's literally almost half the cost at $47. So the 225 call option here is much cheaper and honestly almost 70 delta, it's pretty similar, right? So if Amazon goes up 10 bucks, this will go up pretty much $7.

And that is a much more attractive return versus something that's super in the money like the 180 that I showed you. So the 180 is a lot more expensive. So, this is the leap option that I'm going to go for right here. And I'll kind of go over the payoffs here and how to manage this trade kind of from open to close. As soon as you open this up, you pay $4,700. And here is your break even price. Your break even price is essentially $272 per share for Amazon.

Now, I said that I think Amazon's going to go to $60 per share and it's going to bridge this gap here in the short term and that's good. However, the break even is above the 260 line, right? So, what can I do here? There's two decisions. First of all, in the shorter term, if it goes to 260, I can still make a profit here and close this option for a gain at any time that I wish. I do not have to hold until June 17. There's no reason for me to even hold till June 17 because Theta really starts to kick in and starts to eat away at the option in the last 30 days.

So, kind of the first decision here is if Amazon moves from 240 to 260, that's $20. I'm looking to take profit. So, if that $20 gain happens, the delta, which is basically 7, right? That means that this option is going to increase by $14. So if Amazon goes to 260 in the next 30 to 60 days in the shorter term, then I'm going to gain $14 on this option. And I'll put up the math on the screen right here, but $14 divided by 4770.

That's the return that Amazon leap call option would gain within 60 days if Amazon goes up by $20. So that gain is very attractive to me and within the 60-day mark, I would take profit personally. Okay, in my opinion, it's good to take a profit earlier on, especially if you get a quick gain on a LEAP option. There's no need to hold it into the later stages. So, in 60 days, if Amazon goes up $20, that's my exit point.

Okay, that is where I want to take profit and exit because $14 is essentially almost a 30% gain on this leap option. And I'm always looking to exit between 30 to 50%. So, that would hit my minimum threshold. Now, I could also hold this option a bit longer and look for something around the 50% mark, which would mean that the premium would have to go up by about 20 to $23. Now, this is the short term. Okay, the shorter term is if Amazon stock explodes higher.

Okay, now let's go over the scenario where not much really happens. You have the sleep option, it starts to decay a little bit and the first two months and Amazon is still at 240 or even if it goes down a little bit at 230. At that point, we're still good. We still have a lot of time, but of course, we want stock to have some action. Okay. So, at that point, we can reassess. Then from there, if you reassess and you still want to hold, okay, we're going to give it two more months.

Now, let's go over the scenario where, you know, over the next couple of months or next quarter, Amazon really starts to run. Okay, it starts to run up here towards 280 and higher, right? At the $300 mark is where I think it'll be in roughly 6 months based off of growth and other fundamental indicators. So, let's say it goes up to 300. Okay, now 300 is much higher than 272, the break even. Okay, now we're above break even and we're going to be very far along here in in having a large gain.

Especially if you are in the first 6 months, okay, as we get to June 17, then yes, you need to be above 272 just to make a profit. But if Amazon goes to 300, okay, and that happened within 6 months, then we can kind of take a rough calculation here. I'm going to do some rough math here. I'm actually going to round down to a 70 delta, put to a 60 delta just because this delta will get a little bit smaller as it gets eaten away by gamma and theta and these Greeks right here.

So within 6 months, this won't be as attractive. The risk is higher in terms of less time being available. So we'll take 6 and we will multiply that by the difference which will be $300 is the new strike price. Okay, that's $300 will be the new value of Amazon subtracted by $240 which is essentially the price right now. at $60 and $60 time.6, that's going to be a $36 gain. So, as you can see, $36 divided by the premium that we're paying up front, which is the $4770, that's a really great point to really just take profit.

I'm not sure what more can really happen. Yes, Amazon can go higher than 300, that can happen. But essentially at 300, which is my price target in the next 12 months, if that's reached within 6 months to even 8 months, I'm taking profit. I'm going because after that, the risk is just too high. As you get into the final stages of a leap option, the theta decay will start to eat away at it and also holding it longer decreases your annual return.

So if you hold longer, you are spending more time to make essentially about the same money. So the risk is just too high for just wasting time. All right, the second stock is Na'vi Semiconductor, which makes special power chips that help electronics use electricity more efficiently. Their technology helps AI data centers, EV chargers, and high performance computers run with less heat, faster switching, and lower energy waste.

Na'vias helps improve the electrical power systems underneath AI. Now, Navitas could become one of the biggest hidden winners of the entire AI revolution and AI infrastructure boom. Many investors are focused on video chips. Very few investors are focused on what powers those chips. This is where Na'vias comes in. The world is running into a power problem. AI factories are consuming insane amounts of electricity. Every new AI data center needs faster, cooler, and more efficient power systems just to operate at scale.

And traditional silicon is starting to hit a limitation. That's why gallium nitride, also known as GN, is becoming such a massive opportunity. Navitas specializes in GN and silicon carbide power semiconductor designed for AI data centers, EV infrastructure, industrial electrification, and high performance computing. This matters because GN allows faster switching costs, less heat, higher efficiency, and better power density.

Smaller and more advanced power systems is also very important. As AI racks move towards extreme power densities, companies are going to need dramatically more efficient power delivery infrastructure underneath the AI layer itself. And that is exactly the type of market Na'vias is targeting. The company recently reported Q1 2026 revenue growth of 18% sequentially driven heavily by AI data centers, grid infrastructure, and industrial electrification.

High power markets now represent the majority of their business. This is important because Na'vias is actively transforming from a small consumer charging company into a higher growth AI power infrastructure company and Wall Street is starting to notice. The stock exploded after investors began understanding the AI power opportunity and partnerships tied to next generation power systems. The risk is simple. This is still a smaller company with volatility losses and execution risk.

But if AI data center spending continues accelerating globally, the companies supplying the actual power infrastructure underneath AI could become some of the biggest winners of the next decade. Most investors are chasing the AI brains. Na'vias is helping power the AI body. And if this company executes properly, a 5 billion valuation may only be the very beginning. Now, let me show you a leap option that I'm looking at for Na'vi.

All righty, let's go over a Na'vi leap option. Na'vias has had a lot of volatility. In fact, over the last one month, Na'vias is down 6% despite going from a $19 stock up to a $32 stock, which is an insane run in a short amount of time. This stock is incredibly risky. This stock has so much risk that it can literally go up and then the next week or two just kind of come crashing down, coming back up, and then crashing back down.

Now, I do see this as a nice pretty pattern here because Navitas is a good long-term stock, and this is a a level that I like to be in the stock. I think that it can be $30 again, right? It's only done that twice in the last one month. So, can that happen again? It is very possible. So, I'm going to go trade Na'vias options. Now, here I want to give you a more modified example that I'm doing with my personal money. And that's just because there is a lot more volatility on Na'vas.

So, let me go for something that is it's still a LEAP option, but it's not necessarily going to be a 300 day leap option. It can be 200 days. Okay. Now, I'm gonna play this a little bit more shorter term, which is higher risk, and I'm okay with that, because the whole point of a leap option is to get a very efficient score, let's call it that. So, instead of having to pay $2,100 here, I can basically pay a lot less and even half because $8 is less than half of $21.

So, here the math would be pretty favorable. Okay, so the whole point of a LEAP option for me and in my opinion is to get more capital efficiency and leverage. Okay, leverage is risky if it goes down. Leverage is good if it goes up. kind of similar to how a mortgage works. You put a little down and then you get a big benefit if the value of the house rises, right? So, here is a $20 strike price. This is what I'm looking at.

Now, the delta here is still.7. Okay, that's pretty crazy because the delta you would imagine would be closer to 50 since this option is not in the money by that much. It's only in the money by a dollar. A lot can go wrong here, but here the delta is 7. And that is because the implied volatility is so high. This is probably the riskiest play that you can look at in terms of a leap option, but it can also reap big rewards if good things happen.

And Na'vias has gone to 30 multiple times in one month. This option can be shorter term because Na'vias could literally do that again in the next month. So, if that were to happen, let's go over some math. Okay, so I'm going to click this option right here. $20 strike price and our break even is going to be very high at 28. However, this is a very long-term option going out till January 2027. We're doing this video in June of 2026 in mid June.

I have 6 months here. I have a very long time and my goal is over the next one month that Navitas can hit similar levels that it has been at twice already. So in that case, Theta would actually not kick in very much. Okay, these Greeks would not really affect the option greatly. The greatest effect would be delta. So the delta.7 here is what we will take a look at. Now, if Na'vi goes to $30 per share, that's essentially almost $9 gain.

Okay, almost $9. Hey, let's round it down. Let's call it $8. Let's say we take profit early. And if Navitas hits $29, that's where I would take profit. That is pretty much my personal plan. So that's an $8 gain roughly times the delta.7. That's about $5.60. That is the rough math here. Okay. Now, that's a very attractive return. And that is my exit price on Na'vi. That's what I'm looking to do myself personally. And within 30 to 60 days, if that happens, then I am very happy to take a profit and basically move on to the next play.

Next stock is Microsoft. Microsoft is one of the most important technology companies in the world because they own multiple massive businesses at the same time. Most people think Microsoft is just Windows and Office. But today, Microsoft is really an AI company, a cloud computing company, and a software company. Not to mention gaming company, enterprise infrastructure company. All of these things combined into one big giant behemoth.

Their Azure cloud platform helps power websites, apps, AI systems, and business infrastructure across the world. This matters because as AI demand explodes, companies need more cloud computing power, data centers, and enterprise AI tools. And Microsoft is positioned directly in the middle of that trend. They also partnered heavily with Open AI which helped accelerate products like Copilot across Word, Excel, Teams, and enterprise software.

This is why many investors see Microsoft as one of the safest long-term AI investments. The company generates massive cash flow, has strong profit margins, and owns products businesses use every single day. The risk is mainly valuation and AI spending costs. But if AI adoption continues growing globally, Microsoft could remain one of the biggest winners of the next decade because they are supplying both the software layer and the infrastructure layer underneath AI itself.

Here's a leap option on Microsoft. All right, let's go over Microsoft. So with Microsoft, I actually have a very interesting play. It's a little different. I'll go over this new option strategy that I haven't really discussed in this leaps video, but this is a debit spread. Okay, I'm going to show you a LEAP option. And I'm going to also show you this debit spread because this debit spread is pretty much a leap option, but it's an out-of-the-oney leap option.

So I ended up buying a 450 call option and selling a 520 call option. And this expires in a very long time in 1217 of 2027, so over a year. This is pretty much a modified leap and I am reducing the cost of a out ofthe- money leap by selling a call option against it. This is called a call debit spread. And I do have this in my six-hour free course here on YouTube. You can check out at the end after you watch this video.

It can be a great strategy for you to utilize as well. But this is very similar to a leap strategy. Okay, I'm just buying an out- of-the- money call option. I use it well in my challenges and my one-on-one coaching because it can really do very well and it doesn't require much capital in comparison to buying stock or even a LEAP option. This kind of reduces your upfront cost in many ways. So, it's even more efficient.

But let's go back to an example right here that we're going to do a leap option on with Microsoft because Microsoft is very attractive under $400 per share. I really see Microsoft as a $500 stock. And right now sitting at under $400, I'm very glad with the valuation. So what I'm going to do is I'm going to go for a LEAP option here. And I'm going to go for June. Again, I'm going to go for a one-year LEAP option. And what I'm looking at is again a 70 delta.

So you can see here the delta here and 70. So that would be a 360 strike price. And simply said, this is not cheap. This is a more expensive option here. And that's just because the whole raw value of Microsoft is expensive in general. So, this is going to cost you. However, the price here is still a lot less. It's multitudes less than just having to buy 100 shares of stock. Not everyone has $36,000 laying around or actually $40,000 laying around.

That's pretty high risk, right? A LEAP option, the 8,300, you can still lose all your money. If Microsoft comes crashing down, you can lose all of this. However, keep in mind it would have to go below 360 for you to even start really losing money. However, at expiration, if Microsoft does absolutely nothing, it would still be an in the money option. It would have to go below 360 for you to really expire at zero. So, keep in mind, we're not going to expiry.

Rarely do I ever hold a LEAP option all the way until expiry. That just typically doesn't make too much sense for me. I really don't like the decay that is experienced in the last one month, especially in the last two weeks. really the option is decaying to zero if it's out of the money. Now, if it's in the money, then you have the intrinsic value, right? So, the intrinsic value right here is is $39. Okay, it's about 30 $38 $39 because that's going to be the difference between $398 the current price and $360.

So, my plan here is Microsoft is a $500 stock to me based on my valuation models, based on all the technical analysis that I have done, and that's typically what I cover in my Discord community. I have done that full valuation model and on its way to $500. I see an exit price on Microsoft. If I can do that within six months and it's at $450, I'd be very happy personally because at $450, this option would essentially have intrinsic value or in the money value of $90.

Okay, that 90 is already going to be above the current premium that I'm paying here, which is $8350. However, because I have six more months left, it is still going to have a lot of time value, a tremendous amount of time value. So, the time value that's going to be left is going to vary. That is a complicated figure to back door into, but I'm going to assume approximately right now that it's at least going to have $40 or about half of this right here because the time value here is approximately 4550.

That's how much it is in terms of time value above intrinsic value now. And in 6 months, I think it's going to have about the same to be honest. Within the first 6 months, not a whole lot changes. So if Microsoft goes to 450 along the way to its path to 500 within six months, my exit price would essentially be the $90 that it's in the money. Okay? And then about $40 would be left here. So I have an estimated value of 130.

Now I'm doing really rough estimates. The actual price will depend also on the new implied volatility, interest rates, and other factors that we're not really going to get into. They're not that important. They do affect the option, but they are pretty unpredictable, especially when it comes to interest rates and future volatility. I'm going to assume for this course here that implied volatility will be about the same for a big mega cap stock like Microsoft within the next 6 months.

It's not going to be drastically different. So yeah, that would be my exit price if Microsoft hits 450, which I would place a pretty high probability of happening if we're in a bull market. If the market pulls back, of course, this leap strategy won't work and you'll want to manage this strategy. And we'll cover that in the risk management section, but just kind of go into the risk management right now. I would look at cutting this position if it were to be down about 50%.

So, if the premium went from 83 to 4175, which is half. I'm doing the math here on the spot, but if it's 4175, I would essentially cut this position and I would not want to realize more than a 50 loss. The next stock is McDonald's. And before you click away or think I'm crazy, it is a more speculative play, I guess, because it's down a lot. And maybe I'm completely wrong on McDonald's, or I'm a genius, but here's my reasoning.

McDonald's is much more than just a burger company. Most investors think McDonald's only makes money selling food. But the real power of McDonald's is its global real estate, franchise system, and brand dominance. And when I saw that McDonald's hit a 52-E low, I thought this is a very interesting stock to look further into. McDonald's owns or controls many locations underneath its restaurant and collects rents and royalties from franchises operating all around the world.

You see, it's very interesting because it's almost like a real estate play. Well, it is a real estate play. That means McDonald's can collect massive amounts of money and generate massive cash flow even when the operators are doing most of the day-to-day work. This is why McDonald's is often viewed as one of the strongest business models in the restaurant industry. The company also benefits from scale. They can advertise globally, negotiate cheaper food costs, roll out technology faster, and survive economic slowdowns better than small restaurant chains.

And during difficult economies, many consumers actually trade down towards cheaper fast food options, which can help McDonald's stay resilient. The risk is slower growth compared to some technology companies and pressure from inflation or just changing consumer habits. But investors still see McDonald's as a long-term compounder because it combines global brand power, real estate, and recurring franchise income, and steady cash flow all inside one business.

So, let's look at the technicals of McDonald's because they're absolutely ridiculous. And then I'm going to show you how I'm using a leap option with McDonald's. I want to look at McDonald's. So, McDonald's is going to be a low volatility play. However, the reason why I wanted to go over McDonald's is because I think a lot of value investors and more that retirement focused investor will look at a stock like McDonald's that has a lower PE ratio that has low volatility.

And I want to show you an example of a leap option because they can still be very attractive even when the volatility is low. So McDonald's specifically has hit a 52- week low. And when I was originally making this video, I've been doing this for over a week now. I was looking at McDonald's when it was at $272 per share. And that's actually when I got into it. I told my Discord community, guys, this is where I like it.

I really, really like McDonald's. So, it's already kind of come up and the leap option that I have in my community has already done pretty well cuz it's up $10. But let me kind of show you. I don't think it's too late. Even if you're watching this in the future, the most important thing that you can really take away from this video is the education that I'm providing because you can do this strategy again in the future and you can learn a lot from how I'm picking these strike prices.

So, the position that we have here is in January. I went for a shorter term expiry. That's because I am playing kind of the shorter term game here with McDonald's. I think it's just too cheap. Okay, so if I scroll down here, the market cap is at 200 billion. Okay, the P ratio is at 23. And because McDonald's is a real estate play and it has a lot of stability in their business, global empire really, I think that the stock can go back to $300 per share.

And in my opinion, I'm very bullish on this kind of gap being bridged here. So that's why I ended up getting in at 272 and being up $10 so far has actually performed extremely well. Now what I'm going to show you here, this is my kind of other portfolio here. I did this in my challenge portfolio in my Discord community, but this my other portfolio. Don't have a position open in this one, but let's go for a similar position to what I had open, which is a 270.

I went for the nearest money open. So when it was at 272, I went for a 270 and the delta was not 7. And I was okay with that. Okay, now it's getting close to 7 and that's good. But I went for a it was a roughly 61 at the time when I bought it. So yeah, it has increased in value tremendously. And what I want to do now and I'm still interested in is the 270 because look, this has a lot of time on it and the break even is 300.

So if I hold to expiration and my price target is higher than 300. I'm saying 300 here in the shorter term. So on the way to to the higher price target, which I think let's go back to the technical analysis here. Can the stock be back at 330? I think so. But anyways, let's go for 300 here in the next one to to two or three months. Okay, so if that is the goal, that's the estimated target. Then at $300, okay, that would be $30 in the money plus time value really wouldn't change much at all.

Okay, the time value here currently is now $10. About $10 in the money. Actually, it's $12 in the money. So the time value here is about 18, right? The difference with 30 and the in the money right here value. So 282 and 270 is 12. So it has $18 of time value. Okay, I think that's still going to be there. About $18 is still going to be the McDonald's kind of option here on the 270 is still going to be about the time value on this option.

Not much is going to change. Okay, so if it's at $300, then I'm going to be in the money by 30 and I'm still going to have 18. So 30 plus 18 will be 48. And essentially that's very attractive compared to McDonald's. A very low volatility stock. You can see here that's very low compared to Navitas. In fact, Na'vas is a full 100% higher in implied volatility. Literally a full 100%. How wild is that? That's just wild to be honest.

That's insane to even think about. But here, very low implied volatility on McDonald's could still end up being a great trade. So, something I wanted to point out, low volatility stock that is at a 52- week low. That is a great formula for a potential kind of comeback. And that's already happened here in the next couple of weeks here. I think we can get back to 290. But again, this is just short-term stuff. A leap option is more for longer term betting or gambling or investing, however you want to look at it.

I view it as calculated decision-making. Okay, that is the terminology that I would personally use when I'm using LEAP options. I look at it as a calculated bet, a calculated decision that I am making based off of statistics, probability, and fundamental research. Okay, that's what I really specialize in is not only do I have a finance and analytics degree, but I've also had a lot of experience on Wall Street looking at technical analysis and fundamental analysis.

So, this is just an interesting play that I wanted to show you. The fifth stock is Chipotle. All right, now I wanted to go over Chipotle stock. So, I like Chipotle just because they are increasing the amount of stores that they have. I've been following the stock for a long time now. Has not had the best performance. My average cost is $31 per share. Not a huge position. I have 500 shares here and I'm just very slightly underwater.

I would call this almost not even underwater at all. I'm just basically flat. Now, Chipotle has actually had pretty bad performance over the last 3 months. It's down 11%. But, I see this as a really huge opportunity for a LEAP option. Now, I'm going to show you a very interesting play here. And this is essentially going to be a LEAP option. And then I'm also going to show you how to generate income on a LEAP option using Chipotle.

So let me kind of go over here into trade Chipotle options. And I'm going to go buy a LEAP option. So I'm again going to go for an expiration date that's going to be one year for Chipotle. I think Chipotle as they increase the amount of stores they have. Fast casual is still good. They do have competition and the consumer right now does have a tight wallet, but Chipotle is doing very well in terms of expansion and their same store sales, which is a very important metric has been stable.

It's not been great. It hasn't been going up, but it has been stable. So, I do see Chipotle being a $40 stock in the next one year. And even if it goes to $35, I'm going to show you how even if it went to 35, we could still do very well on a leap option and specifically on selling calls against it, which would be a poor man's covered call. And again, the poor man's covered call strategy is a strategy that I also cover in my six-hour course.

So, I think if you're learning option trading, then that would be the next best video for you to watch after this one. So, let's go over this leap option. I am going to go for an at the money option right here of $30. This does have a little bit lower delta than what I typically like the 7, but I'm going to show you why I'm doing this. So, if I open this option right here, I would need Chipotle to go to $36. Okay? And again, I think that's possible within the year mark, which is June 17.

So in this case, I would actually hold Chipotle to expiration because Chipotle is a longerterm play for me. I don't think too much can happen to it. The implied volatility is actually pretty high at 40. But this is not a tech business. Not much is going to change in the food industry. They have thousands and thousands of stores in USA and globally now. So not much is going to change. They're just going to open more stores and consumers are still going to be eating the fast casual Mexican food that they offer.

Okay. Okay, so the implied volatility being 40 is really to me a gift because this is in my opinion not that risky of a play long term. Not a huge valuation, not cheap, but also not expensive. There's a very clear path for Chipotle to gain runway in terms of growing revenue and profits. Now, what I want to show you is really turning a LEAP option into a poor man's covered call. Okay, the poor man's covered call I will go over here briefly and then I'll give you more resources that you can watch on my channel.

I have the best videos on poor man's covered a call in the six-hour course and I'll guide you through that in a moment. But let me show you this example. So let's go into a shorter term kind of expiry here because when I'm looking at selling a call option, what I'm doing here is essentially a covered call, but I'm using the LEAP option as my shares. So I don't have shares and I'm using this LEAP option as shares. Okay, you can do that when the option is high delta and that's because a LEAP option looks very similar to having shares.

So let's go into something like September here. Okay, this is going to be a little bit under 100 days to expiry. And within a 100 days, I don't think Chipotle is going to go past 35. Okay, so here's what we can do. We can benefit from the $30 call option that we own. And then we can sell a call option against it. Okay, if we sell a call option against it, that's great because now we're collecting premium and we're lowering our upfront cost.

So check this out. If I sell a call option here at this 35 strike, I'm capping my gain. You can see here how the chart changes. You have unlimited gain here, right? Your break even is 3620. Okay, that's the $30 plus $6.20. Now, if I sell a call option, I no longer have unlimited gain if the stock goes up on a call option, right? The risk is you lose the full money that you pay for a call option. But the benefit is you gain money.

As the stock goes up, the call option goes up with it. Here you can see how I cap myself. But this has changed. Okay, it's no longer a break even price of 3620. Now I have a break even price of $35. That's amazing. That is amazing because look now if it goes up I can profit sooner. You can see here how this is not as steep. It's not going up as much as just the call option. However, I still get a benefit. And let me remove this again.

You can see if I remove this. I'm in the red, right? I'm in the red. However, once I sell this 35 call option, I lower my total cost. My total cost has now gone below 500. That's lower upfront cost. And now I'm in the green. So, I can start making money sooner. However, the downside or the risk is that I don't get the unlimited upside anymore. Now, I'm capped. I'm capped at essentially 35 and then I start losing money.

But you can see here how it loses money very slowly. So, my my gain here would be 360, but here it would kind of start to lower, but it wouldn't lower too fast, right? It still goes to 320 and 316 and 312. As you can see, it does go down, but not so much because there is still a benefit of the $30 call option gaining value, but then the 35 call option that you sold starts to lose value. However, my simple management strategy here, my risk management plan is essentially if the stock goes to 35, I just take a full profit.

I close out this position right here. I would close it out right here. If it goes a little bit past 35, I'm okay closing it here as well. If it goes towards 35, anywhere in this zone, I'm okay closing it. There's not a perfect time. That doesn't exist. It's very hard to time the stock market. That's obviously not possible. No one can do that, especially short-term. So, as long as I'm in this area, I will think about closing this option for a profit.

Okay? Especially because there's a shorter time frame here at 918. I don't really have to manage the strategy in a specific way. I just kind of wait until September 18 and this option would expire out of the money if Chipotle is below 35. Okay? So, if it's at 3450 or below, I don't even do anything. If it's at 3450 or higher, then I start thinking about closing. And at $35 essentially I just close this position for a gain.

Now the way to lose money on this trade is really if Chipotle goes down. So if it goes down in value then I would end up losing money. But then I would lose money anyways. Even on the leap option at least here I am losing a little bit less money because I have collected an upfront amount of $126. All right let's talk about exit strategies. And this is chapter 8 the most important module of all. Most investors spend all their time obsessing over entries.

But the truth is, your exits often determine whether you actually make money long-term. Once I had a leap on Tesla back in 2021, I remember split adjusted. It went from $250 to $400 and I had a position that went from $35,000 into $162,000. Now, when you experience something like that emotionally, it changes the way you think. Because at first, it felt incredible. You feel unstoppable. You start thinking, "What if this keeps going?

What if I, you know, sell too early? What if this becomes half a million dollars?" I was exactly in that situation. I was glued to my phone and pre-market I would be very nervous to see if Tesla would be up or down on the day. Tesla was a big portion of my portfolio. And man, these swings were big. 5% moves on Tesla would move the option 15% or more. So I would see the value shift from $162,000 back down to $145,000.

And that would make me feel pretty uncomfortable. I even remember thinking this is more than any of my friends are even making per year on Wall Street. I was contemplating if a further squeeze on Tesla could happen. And my goal was basically $200,000 in profit from one single position. And then I was also researching if I should just take profit right now. Have you been in this situation or something similar? You don't know if you should take profit or not.

Well, because of greed, I ended up making a mistake. I still remember very clearly. Instead of exiting while I was up $162,000, I kept thinking, what if it continues to squeeze? What if I leave another $50,000 $100,000 on the table? So, I ended up holding and then Tesla started pulling back. And because LEAP options are leveraged instruments, the swing became pretty violent. A 5% move in Tesla could easily move the option position 15% or more.

So suddenly I was watching my account swing from like $162,000 on the position down to $145,000. And sometimes this would happen in an incredibly short amount of time. So I just remember being glued to my screen, wasting so much time trying to manage this position. And this was more money than many people make an entire year working on Wall Street. So I took it very, very seriously. And even then I remember my emotions were telling me that I need more.

I was greedy. A normal human behavior, right? So that's how dangerous greed can become during euphoric trades. Eventually for me, man, fear replaced greed and I ended up selling the position. Instead of exiting calmly with a structured plan, I emotionally reacted. I used a stop-loss and seven painful days, I remember still was like exactly one week. I gave myself one week. Seven painful days later, I ended up exiting for around $103,000 in gains.

Now, what's really frustrating is that same day that option ended up closing at $118,000 had I left it open. So later that same day after I got shaken out near the worst possible moment intraday. So I lost a whole car essentially. I mean from $162,000 and by picking a, you know, a stop-loss and placing a stop loss, I ended up losing $15,000 in one single day that I really could have not had happen to me had I not been greedy to begin with.

That experience taught me something very important. Emotional exits are usually messy exits. Now, I'm not saying stop losses are always bad. Every investor has different risk tolerance, but personally with LEAPS specifically, I generally dislike hard stop losses because options can move extremely aggressively intraday and you can get filled for a terrible price during volatile spikes, especially with growth stocks. That's why today I focus much more on thesis changes, valuation changes, technical breakdowns, and they have to be pretty serious breakdowns on the RSI chart has to be below 30.

I focus a lot on position sizing. So even when a position goes down, I'm not tied too much into one position like I was with Tesla because in 2021 when that position I was up 162K, man, that position must have been like 35% of my portfolio or so. Right now, I have a much more structured process. And time remaining on the contract is also very important. In fact, one of the biggest reasons that I built the LEAPS group and structured monthly updates around it is because managing a LEAP option is very emotional.

It is actually emotionally draining and emotionally by yourself can become incredibly difficult once real money is involved. Buying is usually the exciting part. You have all these dreams and aspirations of what can happen with the LEAP option and that is very exciting. But managing the position properly over time as time passes and volatility comes into play is really the hard part. Especially when volatility spikes or the stock suddenly runs really hard.

It's also hard to manage a position when it's running really hard or when fear kicks in like it happened to me or greed kicks in which happened to me in that you know little story that I had which you know looking back on it it was a great learning lesson and it can be uncomfortable holding a large position size even if it's an amazing leap option like I have a leap option on Nvidia. I'm up a ton of money and whenever Nvidia has earnings the stock ends up swinging pretty hard.

So my elite position on Nvidia, although up a lot, ends up having a really massive move. So the reality is a lot of investors know how to buy, very few know how to manage. And honestly, that's where most of the long-term performance actually comes from. Inside the Leaps Group, one thing that I focus heavily on is not just what stock do I like, but how do I structure the trade from entry to what is my exit plan? And I have an exit plan as soon as I enter the stock.

Okay, that's really important. A lot of people think about the exit plan later. No, no, no, no. Think about the exit plan during your entry plan. Your entry plan should have your exit plan. Okay. I also look heavily at how to size a position. It has to be a proper position size within your portfolio. Otherwise, you don't have enough diversity. I think about rolling an LEAP option position, which is a little bit more difficult, and I'll keep it out of this course, but I do cover more advanced topics within the LEAPS group like rolling options.

So, basically, emotions can run rampant during large swings. And a lot of investors, they think they're logical until they're watching a position swing in value, the same value of a luxury car in a few days and then all of a sudden they're not so logical anymore. So nobody consistently predicts every single move correctly. I get that. That is impossible. I cannot do that. Nobody can do that, right? But also have a strict rule set that keeps me away from doing stupid things within my portfolio.

Here is a simple breakdown. My suggestion is aim for anywhere between 30 to 100% return depending on how aggressive the stock is. If it reaches a 52- week high, definitely look at taking profit. Implied volatility reaching historical 80 percentile also is a good time to cut and take profit. And how much time remaining on the contract is incredibly important. The time remaining matters a lot. Let me go over some examples of time remaining on a LEAP option and how to manage a leap option given how much time is left.

We'll do that example later. [sighs] A great stock with a bad exit strategy can still turn into a bad trade. And this is where most beginners fail with LEAP options. They become emotionally attached. They hold on too long. They stop managing the position logically and they slowly watch time decay destroy the structure of the trade. Remember a LEAP option is not a lottery ticket. It is a position and positions need rules.

When I buy a LEAP, I already know where am I taking the profit, where I may cut losses, right? For example, if it's a 50% loss on premium, that is very heavily when I consider cutting for losses. I consider when I may roll the position and what conditions would completely invalidate my thesis. That's important because a leap option is basically a call option on a stock. If that stock changes fundamentally, something changes in the business, then that LEAP option thesis may no longer be valid.

That clarity removes emotional decision-making. All right, chapter nine, creating income from leaps. This is the bonus chapter. This is going to be a very cool one. All right, we need to discuss everything you need to know about the poor man's covered call strategy and then go over an example. I've been utilizing this for the past 12 years. This strategy can be extremely strong for capital efficiency, requiring low capital upfront.

But please take note and watch my example because this strategy can also be very dangerous to someone that doesn't know how to manage it properly. I really love the strategy because I was able to scale my portfolio without needing to have much upfront capital. So, I was able to make a lot of money. So for me, I'm not running this strategy as much anymore because my portfolio is scaled at this point. But on my journey to scaling to seven figures, I did utilize this strategy a lot.

Now, there is a lot of pros and cons. I'm going to teach you how to properly do a poor man's covered call in this video with examples. example that I'm going to go over will use AI stocks and infrastructure plays like Nvidia to fully explain to you and give you a full guide on the poor man's covered call strategy, including how to manage your risk, close, roll, and pick the stock for this strategy properly. So, first of all, what is a poor man's covered call?

A poor man's covered call or a PMCC is a bullish option strategy that is similar to a covered call without needing 100 shares. So, when I show you the example, it's really going to wow you because you don't have to have $10,000 or 15,000 because with a poor man's covered call, you essentially put up a very small amount of capital and can still get a very big reward. This is a great strategy for trading a small portfolio.

A poor man's covered call is an alternative to a covered call strategy in many ways. It has similar return and risk profile as a covered call. So, I'll just add that covered call example stuff later. All right, let's go into chapter 10, which is common mistakes. And this is very important because if you make these mistakes, then all the other stuff in the course is just not really going to be as fruitful for you. The first one is buying OTM options or out of the money lottery leaps.

Instead of buying fantasy, many experienced leap traders focus on deeper in the money contracts with real intrinsic value that move more like actual shares. If you're using LEAP options, kind of like a lottery ticket, and you end up going for leap options that have, I don't know, a 10 delta, you were definitely not really going to be doing too well on that. I mean, unless you are so superb with your stock selection and you ended up picking Nvidia before it like really skyrocketed and you get in super super early and your stock selection is perfect, then you're really just spending money and those options are going to expire out of the money, worthless, and you're just going to be burning cash.

So, for me, I really like deep in the money leaps. They function very similar to how the stock would function. Very lower uh capital upfront in terms of requirements. So it saves you a bunch of money in terms of controlling and having that control over a 100 shares with that call option, but it's really for a fraction of the cost. Now the next mistake is just not enough time. Beginners buy contracts expiring in a few months or even a few weeks.

Heck, I've seen a lot of people buy calls for that same day or same week, right? And when you look at a call option that's expiring very, very short term, that theta is going to be extremely high. the options value is decaying rapidly because it's an, you know, let's say it's an out-of-the-oney option and that out- of- money option has very little time left. So, it's going to go to zero within that expiration time period.

So, if there's only a couple weeks left or a month left, then that call option is going to decay rapidly. Now, if there's an earnings event or something like that, I can see that as an exception, right? If you want to play earnings, you want to use a call option that's one month out or that captures earnings, fine. Yeah, I get it. But the whole point of this course and using LEAP options that I view it is I use LEAP options to replace stock.

I've seen um you know I've worked with financial adviserss when I used to work at Goldman Sachs. I would sit next to many really talented financial adviserss and they were using LEAP options essentially as a stock replacement strategy. So you know why have stock when you can use a LEAP option that controls 100 shares for a fraction of the cost. Now I'll be honest there was a you know a limit to how much you can use this strategy because at the end of the day buying a LEAP option it is leveraged.

It is more leveraged than just owning shares and a lot of high net worth individuals they don't want you know that risk. So they will end up doing some leaps but very very small portions. So if you're trying to grow a smaller account then leaps you can you know you can dial it up. I don't know you can do something that meets your risk profile but let's say 20% of your portfolio if you have a tiny portfolio. For me I use leaps 5 to 10% of my portfolio.

Nothing crazy. Okay because a leap gives you a lot of leverage. are really really powerful. But also when the market is bare market which granted you know we've been in really really good market for a very very long time and anytime we even get some bare moves for a month or two or three a lot of investors panic but we get back to business as usual. So LEAP options are very powerful for that. But a common mistake that I see is just really really short-term stuff and just really big position sizing.

Really big position sizing is also not the best move. You should have diversity amongst strategies within your portfolio. So beginners buy contracts expiring in a few months thinking that these are, you know, leap options. Then they panic when theta starts to really decay and accelerate. And the whole advantage of a leap option is time. It's a leap because it's a the L in LEAP is long-term. So it's a long-term equity anticipated, you know, security.

So LEAP is long-term. So another common mistake with LEAP option is overpaying for the implied volatility. Beginners get excited before earnings or during hype and they buy contracts when option premiums are already inflated. And even if the stock goes up, the option can still lose value because implied volatility collapses after that event. This is actually referred to as IV crush. IV crush happens typically after earnings or after an event.

And that's why experienced traders pay attention not just to the stock price but also to how expensive the option is itself. So if they end up holding the option too long, Theta starts kicking in. If the position size is too big, then too much impact in your portfolio. So you really have to watch out on a leap option from all these angles because you want to be positioned correctly. Now let's talk a little bit about the psychology because this is super underrated but also very powerful.

So why do leaps feel too slow? I've gotten asked that question. I've been coaching for over 6 years now. I've coached over 2,000 students. I've had many retirees that or people that I got into retirement and sometimes people say, "Man, this is too slow." And man, I'm telling you, you are an addict or gambler if you can't wait several months for your thesis to play out on a stock and for you to experience a 50% gain. Like that is what's possible with the LEAP option.

That is the impact that can have on your overall portfolio, right? If it's, you know, let's say it's 20% of your portfolio and then that that 20% of your portfolio has a 50% return, that small portion of your portfolio just generated you a 10% overall return in your entire portfolio, right? So leap option can be super powerful for your portfolio. But if you view it as too slow, you got to find the casino or something.

I don't recommend that. If you can't wait, then maybe like day trading or something else is more in your style. But a leap option should not feel too slow. You should have a longerterm thesis and use a leap option as essentially stock replacement. So don't fall into that mistake of having that impatient mindset. You really have to think about it from the compounding mindset. So imagine what a benefit is to see your portfolio actually scale over time.

I've done it with Leaps. It was a tremendous benefit in my portfolio. In 2021, I used LEAPS on Tesla. I was also trading other technology companies and Leaps completely transformed the game for me. I mean $100,000 when I was living in Philadelphia and I, you know, finished college. I had my you know I was working consulting for some time because I had already had so much finance experience. I took a consulting job. Leaps took me from 100K which is good right to 700K which really I felt at 700K that I was able to generate enough income to you leave United States and I started traveling and doing a whole lot of travel around know South America in Europe and I really started to really enjoy seeing different cultures.

So you know that really allowed me through Leaps. If it wasn't for Leaps it's really really difficult to really scale a portfolio without LEAPS in my opinion. I mean, there are some other strategies that I've discussed on this channel, but for the most part, I mean, the wheel is not going to get you, you know, to really big growth and investing in individual stocks, it can do that, but it's also like, you know, it it can be difficult to find which stocks are going to be the real runners.

But with the LEAP option, because it is a leveraged bet, even if a stock runs 20 30%, the LEAP has such a huge kind of leverage factor. So that's also why I just created this special leaps group only for this video is because if you really want to change your life, I'm ready to show you basically how I did it myself back in 20121 because I see a lot of same patterns right now. There's a lot of same opportunities in the market, especially with AI infrastructure stocks and using LEAP options properly, man, it can be the difference between, you know, like my story, 100K, good savings, but I was still working 700K.

I'm like, I'm quitting my job. I'm out of here. I'm focusing on this full-time. This is this