LEAPS Options Introduction
Trade as a Trend Follower
Long Term Equity Anticipation Securities (LEAPS) are long term options available on over 300 equities and 11 indexes. LEAPS provide traders with a longer term view of the market as a whole or on an individual stock. As with traditional short term options, LEAPS are available in two types, calls and puts. So what is the point? LEAPS are key for Trend Followers trading the stock market.
Q. Can I trade regular options as a Trend Follower?
A. No. Regular options are not for trend following. Only LEAPS can
be used. Traditional options will not work for trend followers. LEAPS are
perhaps the biggest enhancement to trend following in 20 years. LEAPS avoid the
staggering effects of time decay unlike regular options. Managing time decay is
what makes LEAPS viable for trend following.
Q. Why are LEAPS fantastic for Trend Followers?
A. LEAPS gives trend followers another tool to trade trends in equity
markets. LEAPS allow you to maximize your returns. Maximizing your trading dollar
is a key reason why the LEAPS module is a powerful add-on for the core TurtleTrader
course. LEAPS can also lower the cost required to enter a market and even mitigate
drawdowns.
Q. What other advantages do LEAPS have for Trend Followers?
A. Some brokerage firms place restrictions on the types of equity trades
that individual and retirement accounts can place. LEAPS can solve this potential
problem.
Stocks Up and Down
Leon Cooperman, a founder and principal of Omega Advisors, and a former head of investment research at Goldman Sachs, offered in an interview with Ron Insana (CNBC):
I think all we've learned is what we already knew, is that stocks have become like commodities, regrettably, and they go up to limit and they go down to limit. And we've also known over the years that when they go down, they go down faster than they go up.