2014 LEAPS

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    Posted: 27 July 2011 03:23 PM

    2014 LEAPS will be listed on September 12, according to OIC. (AAPL is Cycle 1).

    I’m starting my long-term planning. Anyone have targets in mind? Calls or spreads?


    Last year they went on Sep 13th, with extra strikes added in the following several days. I bought a single Jan’13 $400 call (sadly, a tiny investment since I was out of funds) on 9/15 for $20. It hasn’t traded that low since then, though it did go below $25 on June 20 (current price near $60). Right now it looks like a decent potential for a fire-and-forget 10-bagger (with the usual caveats of “fire-and-forget” such as market meltdowns, Steve Jobs health, debt ceilings, etc)

    With AAPL’s ‘coiled spring’ remaining steadily coiled, and seeing that I will have much less time to jump in and out of market in the next two years, I plan to rely on 2014 LEAPS more than other options.

    Would be interested in anyone’s thoughts and strategies.

         
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    Posted: 27 July 2011 04:10 PM #1

    Thanks for the info. Happy to know they go on sale right after I get back from vacation in Thailand.

    I might pick up a couple of 2014 LEAPS too, but haven’t thought about the strike price just yet. What were your thoughts on that?

         
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    Posted: 27 July 2011 04:29 PM #2

    Roman - 27 July 2011 06:23 PM

    2014 LEAPS will be listed on September 12, according to OIC. (AAPL is Cycle 1) ... With AAPL’s ‘coiled spring’ remaining steadily coiled, and seeing that I will have much less time to jump in and out of market in the next two years, I plan to rely on 2014 LEAPS more than other options ...

    If it goes on fire sale, I might buy 10 to 30 contracts, probably ATM.

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  • Posted: 27 July 2011 06:31 PM #3

    Mace - 27 July 2011 07:29 PM
    Roman - 27 July 2011 06:23 PM

    2014 LEAPS will be listed on September 12, according to OIC. (AAPL is Cycle 1) ... With AAPL’s ‘coiled spring’ remaining steadily coiled, and seeing that I will have much less time to jump in and out of market in the next two years, I plan to rely on 2014 LEAPS more than other options ...

    If it goes on fire sale, I might buy 10 to 30 contracts, probably ATM.

    What to buy, oh what to buy.

    It’s a trade off between contract price, and the number of contracts you can get.  Price is really important.

    I put together a little spreadsheet that compares ROI’s on multiple contracts against multiple price targets. It determines the best Strike at any particular target. I have very well with this tool.

    [ Edited: 27 July 2011 06:40 PM by Gregg Thurman ]

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  • Posted: 27 July 2011 06:32 PM #4

    Mace - 27 July 2011 07:29 PM
    Roman - 27 July 2011 06:23 PM

    2014 LEAPS will be listed on September 12, according to OIC. (AAPL is Cycle 1) ... With AAPL’s ‘coiled spring’ remaining steadily coiled, and seeing that I will have much less time to jump in and out of market in the next two years, I plan to rely on 2014 LEAPS more than other options ...

    If it goes on fire sale, I might buy 10 to 30 contracts, probably ATM.

    Mace, what would you consider a fire sale?

         
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    Posted: 27 July 2011 06:46 PM #5

    I wonder if buying 2013 leaps in September is also a good idea.  I was planning on rolling some 2012 leaps bought in Oct 2010 over to ‘13, instead of ‘14.  The thinking behind this is I can still get my 1 year long term cap gains, and pay less time value on the options. Basically buy 16 months out, roll every 12.

    Anyone have an opinion on ‘13 vs. ‘14 when they get listed?

         
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    Posted: 27 July 2011 07:19 PM #6

    CdnPhoto - 27 July 2011 07:10 PM

    Thanks for the info. Happy to know they go on sale right after I get back from vacation in Thailand.

    If you get the notion I for one would enjoy a link to your photos from there….. tongue laugh

         
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    Posted: 27 July 2011 07:51 PM #7

    Gregg Thurman - 27 July 2011 09:31 PM

    ... I put together a little spreadsheet that compares ROI’s on multiple contracts against multiple price targets. It determines the best Strike at any particular target. I have very well with this tool.

    Please share with us grin.


    Alice,

    I’ve no idea.  If Gregg is willing share his spreadsheet, we can discuss.  Sell and raise cash, work out what to do later.  Capital preservation mode.

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    Posted: 27 July 2011 08:57 PM #8

    dc930 - 27 July 2011 09:46 PM

    I wonder if buying 2013 leaps in September is also a good idea.  I was planning on rolling some 2012 leaps bought in Oct 2010 over to ‘13, instead of ‘14.  The thinking behind this is I can still get my 1 year long term cap gains, and pay less time value on the options. Basically buy 16 months out, roll every 12.

    Anyone have an opinion on ‘13 vs. ‘14 when they get listed?

    In Jan 2013 apple TTM should be $50+, with $150 billion cash
    In Jan 2014 apple TTM should be $70+, with $200 billion cash

    I’ll leave it to you to come up with a minimum P/E multiple (with & without cash), and what the likely upside potential is.

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    Posted: 28 July 2011 01:37 AM #9

    dc930 - 27 July 2011 09:46 PM

    I wonder if buying 2013 leaps in September is also a good idea.  I was planning on rolling some 2012 leaps bought in Oct 2010 over to ‘13, instead of ‘14.  The thinking behind this is I can still get my 1 year long term cap gains, and pay less time value on the options. Basically buy 16 months out, roll every 12.

    Anyone have an opinion on ‘13 vs. ‘14 when they get listed?

    No STRONG opinion other than it’s best to try to time LEAP/Calls purchases to times when aapl is beat down. Seems obvious but it’s a real value adder to only buy these when everyone is running for the hills.

    My only other comment would be that modestly deep ITM LEAPS seem to have the best intrinsic cost to risk ratio. JMO as relative newcomer (18months) to LEAPS.

    Would be interested in hearing comments re that approach.

      cheers
      JohnG

         
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    Posted: 28 July 2011 01:47 AM #10

    johnG - 28 July 2011 04:37 AM
    dc930 - 27 July 2011 09:46 PM

    I wonder if buying 2013 leaps in September is also a good idea.  I was planning on rolling some 2012 leaps bought in Oct 2010 over to ‘13, instead of ‘14.  The thinking behind this is I can still get my 1 year long term cap gains, and pay less time value on the options. Basically buy 16 months out, roll every 12.

    Anyone have an opinion on ‘13 vs. ‘14 when they get listed?


    No STRONG opinion other than it’s best to try to time LEAP/Calls purchases to times when aapl is beat down. Seems obvious but it’s a real value adder to only buy these when everyone is running for the hills.

    My only other comment would be that modestly deep ITM LEAPS seem to have the best intrinsic cost to risk ratio. JMO as relative newcomer (18months) to LEAPS.

    Would be interested in hearing comments re that approach.

      cheers
      JohnG

    Good point. worthy consideration considering the 2014 LEAPS seemingly will be released during the iphone 5 release frenzy, it may be wise to wait for a pullback before buying.

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    Posted: 28 July 2011 02:20 AM #11

    Sheesh.  Jan 14s? 

    Well, maybe I’d buy some Jan 14 600s?

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    Posted: 28 July 2011 02:35 AM #12

    iOSWeekly - 28 July 2011 04:47 AM

    ...the 2014 LEAPS seemingly will be released during the iphone 5 release frenzy, it may be wise to wait for a pullback before buying.

    Great point! I failed to consider the obvious. Last year there were no such frenzy; in fact the bull run had just only started which explains why the 2013’s have never come back to their opening price thus far. This year might not be as enticing at the open.

    Still, once I start offloading 2012’s sometime this fall, I need a place to park the proceeds into AAPL long-term.

    dc930 - I already have a ton of 2013s as I prefer to have a mix of exp dates so wasn’t looking at comparing 13’s and 14’s but it’s a worthy exercise. I don’t have a scientific approach like Gregg, just learning from recent experience and from AFB.

         
  • Posted: 28 July 2011 12:37 PM #13

    I advise keeping a close eye on a long term chart of IV when timing LEAP purchases.

         
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    Posted: 28 July 2011 03:41 PM #14

    IIe programmer - 28 July 2011 03:37 PM

    I advise keeping a close eye on a long term chart of IV when timing LEAP purchases.

    +1
    While applicable to all, this is particularly important for far OTM LEAP purchases.

    I am actually considering 2 other long term strategies for leaps. 

    1) But moderately ITM leaps (delta of ~.60) This is closer to holding stock and will book the gains sooner as aapl rises. The investment is significantly higher, but it gives much greater flexibility to cash out sooner.  It is also less vulnerable to IV fluctuations.  I would also consider selling cc’s one or 2 months out as long as I held the long leaps.
    2) Same strategy as above, but buy ATM leaps. 

    I guess I am questioning holding far OTM leaps and waiting until aapl gets past 500 to make real money, vs holding a ITM or ATM leap and participating in the rise to 500+.

    Of course you can buy many more OTM leaps for the same investment.

    What am I missing?  Is anyone considering ATM or ITM leaps?

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  • Posted: 28 July 2011 04:19 PM #15

    IIe programmer - 28 July 2011 03:37 PM

    I advise keeping a close eye on a long term chart of IV when timing LEAP purchases.

    How does one monitor IV for LEAPS using schwab.com?  What exactly should I be looking for?