LEAPSLEAPS

Long Term Equity Long Term Equity

Anticipation SecuritiesAnticipation Securities

LEAPSLEAPS

• Basically a Long Term OptionBasically a Long Term Option

• Minimum of 1 Year OutMinimum of 1 Year Out

• Maximum of 3 Years OutMaximum of 3 Years Out

• Excellent Investment Tool For Excellent Investment Tool For Retirement AccountsRetirement Accounts

• Advantage of LeverageAdvantage of Leverage

• Ideal for Conservative InvestorsIdeal for Conservative Investors

Searches/SelectionSearches/Selection

• Investools Big ChartInvestools Big Chart– Future Industries/Sectors That Will Remain Future Industries/Sectors That Will Remain

StrongStrong• Bullish SearchesBullish Searches

– Strong Stocks in Multiple Time PeriodsStrong Stocks in Multiple Time Periods– Great Earnings, Sales and Cash Flow GrowthGreat Earnings, Sales and Cash Flow Growth– Growth Stock Strategy #1Growth Stock Strategy #1– Growth Stock Strategy #2Growth Stock Strategy #2

• Global SearchGlobal Search– CustomizeCustomize

• IBD (Investors Business Daily) 100IBD (Investors Business Daily) 100

StrategiesStrategies

• Can Be Used on Traditional Stocks or Can Be Used on Traditional Stocks or on Equity Indiceson Equity Indices

• Alternative to Outright Stock PurchaseAlternative to Outright Stock Purchase

• Can Be Used on Stocks That Have Can Be Used on Stocks That Have Recently SplitRecently Split

• Can Sell a Current Month Call on a Can Sell a Current Month Call on a Future Position (Like a Covered Call)Future Position (Like a Covered Call)

Traditional Stock/Equity Traditional Stock/Equity IndexIndex

• Not All S/E Have LEAPS – CBOENot All S/E Have LEAPS – CBOE

• Are High Premium Because of Longer Are High Premium Because of Longer Period of Time ValuePeriod of Time Value

• Break Even Point at Expiration Higher Break Even Point at Expiration Higher Than UsualThan Usual

• Examples: POT, RIMM, GGExamples: POT, RIMM, GG

POT – Potash Corp 12/3/07POT – Potash Corp 12/3/07

• Straight PurchaseStraight Purchase– $123.84 for 100 Shares = $12,384$123.84 for 100 Shares = $12,384

• LEAPS Purchase January 2010 (Exp 774)LEAPS Purchase January 2010 (Exp 774)• Deep In The Money vs Out of The MoneyDeep In The Money vs Out of The Money

– Investment Diff = $1250 / B/E Diff = $17.50Investment Diff = $1250 / B/E Diff = $17.50– Deep In The MoneyDeep In The Money

• $100 Call $52.30 Premium = $5230 B/E $152.30 (Mine was 70c @ $37 on $100 Call $52.30 Premium = $5230 B/E $152.30 (Mine was 70c @ $37 on 9/12/07) 9/12/07)

– In The Money (ITM)In The Money (ITM)• $110 Call $47.80 Premium = $4780 B/E $157.80$110 Call $47.80 Premium = $4780 B/E $157.80

– At The Money (ATM)At The Money (ATM)• $120 Call $43.60 Premium = $4360 B/E $163.60$120 Call $43.60 Premium = $4360 B/E $163.60

– Out of The Money (OTM)Out of The Money (OTM)• $130 Call $39.80 Premium = $3980 B/E $169.80$130 Call $39.80 Premium = $3980 B/E $169.80

• Straight Purchase vs LEAPS PurchaseStraight Purchase vs LEAPS Purchase– Investment Diff = $7154 Investment Diff = $7154

RIMM – Research In MotionRIMM – Research In Motion

• Straight PurchaseStraight Purchase– $104.75 for 100 Shares = $10475$104.75 for 100 Shares = $10475

• LEAPS Purchase January 2010 (Exp 774)LEAPS Purchase January 2010 (Exp 774)

• Deep In The Money vs Out of The MoneyDeep In The Money vs Out of The Money– Deep In The MoneyDeep In The Money

• $90 Call $45.85 Premium = $4585 B/E $135.85 (Mine was 70c @ $33.40 on 9/12/07)$90 Call $45.85 Premium = $4585 B/E $135.85 (Mine was 70c @ $33.40 on 9/12/07)– In The Money (ITM)In The Money (ITM)

• $100 Call $42.05 Premium = $4205 B/E $142.05$100 Call $42.05 Premium = $4205 B/E $142.05– At The Money (ATM)At The Money (ATM)

• $105 Call $40.30 Premium = $4030 B/E $145.30$105 Call $40.30 Premium = $4030 B/E $145.30– Out of The Money (OTM)Out of The Money (OTM)

• $110 Call $38.60 Premium = $3860 B/E $148.60$110 Call $38.60 Premium = $3860 B/E $148.60– Investment Diff = $725 / B/E Diff = $12.75Investment Diff = $725 / B/E Diff = $12.75

• Straight Purchase vs LEAPS PurchaseStraight Purchase vs LEAPS Purchase– Investment Diff = $5890 Investment Diff = $5890

GG – Gold Corp 12/3 07GG – Gold Corp 12/3 07

• Straight PurchaseStraight Purchase– $32.58 for 100 Shares = $3258$32.58 for 100 Shares = $3258

• LEAPS Purchase January 2010 (Exp 774)LEAPS Purchase January 2010 (Exp 774)

• Deep In The Money vs Out of The MoneyDeep In The Money vs Out of The Money– Deep In The MoneyDeep In The Money

• $20 Call $15.80 Premium = $1580 B/E $35.80 (Mine was 20c @ $11.30 on 9/12/07) $20 Call $15.80 Premium = $1580 B/E $35.80 (Mine was 20c @ $11.30 on 9/12/07) – In The Money (ITM)In The Money (ITM)

• $30 Call $10.40 Premium = $1040 B/E $40.40$30 Call $10.40 Premium = $1040 B/E $40.40– At The Money (ATM)At The Money (ATM)

• $35 Call $8.40 Premium = $840 B/E $43.40$35 Call $8.40 Premium = $840 B/E $43.40– Out of The Money (OTM)Out of The Money (OTM)

• $40 Call $6.70 Premium = $3860 B/E $46.70$40 Call $6.70 Premium = $3860 B/E $46.70– Investment Diff = $2280 / B/E Diff = $10.90Investment Diff = $2280 / B/E Diff = $10.90

• Straight Purchase vs LEAPS PurchaseStraight Purchase vs LEAPS Purchase– Investment Diff = $1678 Investment Diff = $1678

Split StrategySplit Strategy

• Check News for Split CalendarCheck News for Split Calendar• Monitor Strong Stocks That Are Nearing Monitor Strong Stocks That Are Nearing

SplitSplit• Use Investools Split Analysis (Basic Stocks)Use Investools Split Analysis (Basic Stocks)• As a General Rule the LEAPS Split Strategy As a General Rule the LEAPS Split Strategy

is Best for a 2 for 1 Splitis Best for a 2 for 1 Split• Historically a Stock Will Achieve Its Prior Historically a Stock Will Achieve Its Prior

Split Value in 24 Months TimeSplit Value in 24 Months Time• Purchase LEAPS Shortly After Post Split Purchase LEAPS Shortly After Post Split

Depression Depression

Sell Current Month CallSell Current Month Call

• Another Way to Increase Account ValueAnother Way to Increase Account Value

• Similar to Stock Covered CallSimilar to Stock Covered Call

• Allows For Partial to Full Recouping of Allows For Partial to Full Recouping of Original Premium for LEAPSOriginal Premium for LEAPS

• Want to Sell as Far Out of The Money as Want to Sell as Far Out of The Money as Possible to Preserve Original LEAPSPossible to Preserve Original LEAPS

• Want to Expire Worthless to Keep PremiumWant to Expire Worthless to Keep Premium

• Examples: POT, RIMM, GGExamples: POT, RIMM, GG

POT 12/3/07POT 12/3/07

• POT Trading @ $123.84POT Trading @ $123.84– Dec 145 @ $1.10Dec 145 @ $1.10– Dec 140 @ $1.67Dec 140 @ $1.67– Dec 135 @ $2.60Dec 135 @ $2.60– Dec 130 @ $4.05Dec 130 @ $4.05– Dec 125 @ $5.95Dec 125 @ $5.95

RIMM 12/3/07RIMM 12/3/07

• RIMM Trading @ $104.75RIMM Trading @ $104.75– Dec 130 @ $1.77Dec 130 @ $1.77– Dec 120 @ $3.48Dec 120 @ $3.48– Dec 115 @ $4.72Dec 115 @ $4.72– Dec 110 @ $6.35Dec 110 @ $6.35– Dec 105 @ $8.47Dec 105 @ $8.47

GG 12/3/07GG 12/3/07

• GG Trading @ $32.58GG Trading @ $32.58– Dec 40 @ $.07Dec 40 @ $.07– Dec 37.5 @ $.20Dec 37.5 @ $.20– Dec 35 @ $.58Dec 35 @ $.58

More ExamplesMore Examples

• My Personal Account 12/3/07My Personal Account 12/3/07– POT POT

•9/12/07 70c @ 37, Mark 67.55 Profit $30559/12/07 70c @ 37, Mark 67.55 Profit $3055

• Investment = $3700 Return = 82.57%/3 = Investment = $3700 Return = 82.57%/3 = 27.52% Monthly or 330.28% Annually27.52% Monthly or 330.28% Annually

• If Straight Purchase on 9/12/07 @ $89.00, If Straight Purchase on 9/12/07 @ $89.00, Current Close Price $123.84 = $3484 Gain, Current Close Price $123.84 = $3484 Gain, Return = 39.15%/3 = 13.05% Monthly or Return = 39.15%/3 = 13.05% Monthly or 156.6% Annually 156.6% Annually

More ExamplesMore Examples

• My Personal Account 12/3/07My Personal Account 12/3/07– RIMM RIMM

•9/12/07 70c @ 33.40, Mark 54.475 Profit 9/12/07 70c @ 33.40, Mark 54.475 Profit $2107.50$2107.50

• Investment = $3340 Return = 61.31%/3 = Investment = $3340 Return = 61.31%/3 = 20.44% Monthly or 245.25% Annually20.44% Monthly or 245.25% Annually

• If Straight Purchase on 9/12/07 @ $85.00, If Straight Purchase on 9/12/07 @ $85.00, Current Close Price $104.75 = $1975 Gain, Current Close Price $104.75 = $1975 Gain, Return = 23.24%/3 = 7.75% Monthly or Return = 23.24%/3 = 7.75% Monthly or 92.9% Annually 92.9% Annually

More ExamplesMore Examples

• My Personal Account 12/3/07My Personal Account 12/3/07– GG GG

•9/12/07 70c @ 11.30, Mark 15.60 Profit 9/12/07 70c @ 11.30, Mark 15.60 Profit $430$430

• Investment = $1130 Return = 38.05%/3 = Investment = $1130 Return = 38.05%/3 = 12.68% Monthly or 152.2% Annually12.68% Monthly or 152.2% Annually

• If Straight Purchase on 9/12/07 @ $27.00, If Straight Purchase on 9/12/07 @ $27.00, Current Close Price $32.58 = $558 Gain, Current Close Price $32.58 = $558 Gain, Return = 20.67%/3 = 6.89% Monthly or Return = 20.67%/3 = 6.89% Monthly or 82.67% Annually 82.67% Annually

I Am Sold on LEAPSI Am Sold on LEAPS

• More Conservative ApproachMore Conservative Approach

• Excellent Tool for IRA, IRRA, 401kExcellent Tool for IRA, IRRA, 401k

• Q & AQ & A

• CommentsComments