 Leap options. Probably the most unattractive way to trade options on YouTube. Why? Because it's safer and it doesn't make you a millionaire overnight. I just realized I have so much hair on my hoodie, but it's because of them. Yeah, they're sleeping. So options trading is absolutely amazing when you know what you're doing, but it can also be terrifying when the only thing you know about options trading is wall street bets. Today I want to talk about leap options and the benefits over short term option trading. So first of all, yes, I am guilty of short term options trading as well. Why? Because it's risky. It's fun. It makes a lot of money. It's cool. But am I aware of the fact that I should be trading a lot more leap options because it's safer and makes me money consistently? Yes. Alright, so next time you hang out with your Robinhood investor friends, leap option stands for long term equity anticipation securities. Long term meaning the expiration date of that specific option is longer than one year. Alrighty, we probably lost 90% of the view is because who has time to invest more than a year into anything nowadays, right? Am I right? But who cares? The most important thing is that you and I are still here and I'm going to tell you about the benefits of leap options. And I'm not just going to talk about them hypothetically. I'm actually going to show you one contract that I have and hold in my portfolio. But before I do that, here are some facts that you need to know about leap options before you start trading them. Number one, taxes. If you hold a leap option for longer than one year and one day, you don't have to pay short term capital gains. Instead, you pay long term capital gains. Depending on your income, that's a huge difference because long term capital gains tax is capped at 20% currently and short term capital gains goes up to 37% again, depending on your income. And that's already a big difference. Number two, leverage. If you have a small investment budget, but you still want to participate in the market and you want to start investing today rather than tomorrow, leap options is for you. One example, Apple is currently trading at $160 per share. So if you want to have 100 shares of Apple, that's $16,000, which is a lot of money. Instead of doing that, you can technically buy a leap option expiring in a year and a half for a fraction of that money, and you still have the ability to hold and control 100 shares of Apple. I'll show you my leap option, which is an Apple leap option in a second. Number three, leap options are forgiving. How can a leap option be forgiving? So first of all, if you buy a leap option, you basically pay for time. Time is very valuable. And if you have watched any of my previous videos, you know that I keep telling you guys it's very hard, nearly impossible to time the market perfectly or even time the market in general. So you don't have to be Warren Buffet or an absolute genius to make money with leap options. All right, let's look at my personal leap option that I purchased on February 5. So on February 5, 2021, I purchased one leap option on Apple with a strike price of $135 and an expiration date of June 17, 2022, which cost me $2,465. So with this contract, I'm basically saying that I believe that Apple will trade above $135 by next year by June 17. And that's why I purchased this leap option. This contract gives me the right and not the obligation to purchase 100 shares at the strike price of $135 next year. Since I had to pay a fee for this contract, my break even price on Apple is $159. Since I bought this contract, Apple has been up and down, had some rough times, and my contract was losing value because Apple was trading sideways. I was losing money because Apple was trading sideways, which means every single day I was losing money because I paid for time. So I saw this leap option at 20% or 30% loss for like, you know, a couple weeks, which is not nice to look at. But at the same time, I had the confidence and I knew I was comfortable because I had to hold it or I still had time. I had a year left until expiration date. So Apple finally surpassed $160, which basically makes my option valuable now because it's in the green and it made a profit. So currently my contract is up 42%, which is the gain of roughly $1,000. So I can do three things now with this option. Number one, I hold it until expiration date if I'm still bullish on the company. Number two, I sell the contract and just take the profit of $1,000, but also create a taxable event, which means I have to pay short term capital gains on the $1,000. And number three, I can exercise the contract, which means I can purchase 100 shares at the strike price of $135. If I exercise, I need to include the fee that I paid for the option as well. So I would technically purchase 100 shares at $159 per share. Depending on what your financial situation or financial goal is, you have to decide for yourself if you want to hold it until expiration date and get the long-term capital gains on it. You want to sell it, take the profit right now, reinvest it somewhere else or exercise it and hold the shares. I don't know your personal situation, so I'm going to just tell you what I will be doing with my own contract. I decided for now I will be just holding this contract because my conviction on Apple hasn't changed. I believe that over the next year or now it's like six months, seven months, it will increase in value. That could change in a heartbeat. If something bad happens to Apple, I might sell it at a profit. But as of now, everything looks good. So I will hold the contract until expiration date. But let's look at one more thing. What if I had bought shares instead of the leap option? So let's just say I had $2,500, which roughly gives me 18 shares because at that time, the price was $137 per share. Let's just say I bought 18 shares on February 5th. These 18 shares will be worth $2,988, which is $510 short of what my option is worth. If I continue to hold this option and Apple is increasing in value, this gap will be bigger because my option is basically or symbolizes 100 shares. I'm handling 100 shares of Apple. If I just bought them, I had 18 shares in my hand. And then, you know, if it increases good, if not, yeah, it's the most important question. Should you buy leaps? I don't know. I think you have to ask yourself the question if you want to leverage your money and know that you don't have to sweat every time the any news outlets says anything bad about the economy. It's your call. I personally allocate 10 to 15% of my entire portfolio into leap options and increase that to 30% if it's a cash secured put. Alright, so now that I hyped up leap so much, I also have to mention that if you pick a stock that's absolutely trash or we go into a bear market for three years, you will lose that money. So be aware of the fact that this leap option of $2,456 could technically be worth nothing if we, you know, go into a bear market for two years and then Apple trades under $135 by next year. That's just very important. Listen to this. Leap options don't give you 100% upside. If you pick a stock that's not good and it goes down in value over the next year and a half or two years of whatever the expiration it is, you will lose 100% of that premium or fee that you paid for this contract. So make sure you don't buy a leap option based on financial advice you saw on TikTok or on YouTube. Do me the favor and just research the companies before you invest a single dollar into any company that you see online. Do your research, look into it. If you believe in it, then invest. Have a good one.