Lecture 8: LEAPS

If you take the time to understand LEAPS (long-dated options) and combine this tool with your search for bargains, you can craft specific risk reward investments with 100% to 1,000% upside. In certain situations, you can design much better risk and reward outcome than investing in stock.  When LEAPS work well, they can becoming addictive, so portion control is critical.

The Professor looks at options/LEAPS in a unique way.

Go here: http://www.scribd.com/doc/68687870/Lecture-8-on-LEAPS

3 responses to “Lecture 8: LEAPS

  1. Thanks for all your posts, John. Really great site. I have two questions:
    1. Do you use LEAPS in your own portfolio? If so, I would be interested in hearing what types of situations you focus on (special situations, good companies, etc.)
    2. Will we be going over any live case studies of comparing and contrasting the use of LEAPS to outright purchase of stock?
    Thanks Again.

  2. Yes, I do use LEAPS on occasion in both special situations and good companies (defined as ones with relatively stable, profitable growth) because, though LEAPS have limited life, you do have the catalyst of the special situation and the increase in intrinsic values working in your favor (hopefully).

    We will have a few examples in time. Meanwhile, I have to finish putting up my investment library on this blog. Thanks for your post and patience.

  3. This paper was published in 2005 when consumer staple stocks were priced at modest market multiples. Just be aware that some of the “steady, stable” companies referenced in this articles currently trade for PEG multiples > 3 x (CPB) and 10 x (KO).

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