A low maintenance way to play weekly options is to use LEAP options and then trade weekly options against it similar to how you would do with a covered call type of options trade.

Some investors refer to this type of options trading strategy as a covered write — or a synthetic covered call strategy and they are similar however with this type of trade the required investment — or margin — can be much less. When you are using stock for these types of option strategies, you must put up the entire amount to purchase the stock which can be many thousands of dollars. On the other hand, when you are using options — either monthly options or longer term options such as LEAP options — you investment is capped to the price of the option — which can be much, much less.

Weekly Options — LEAPS

LEAPS (long-term equity anticipation securities) are longer term options. Instead of expiring in weeks — or a month — LEAPS can have a life span of months and even years. In fact — they are not even ‘options’ — they are ‘securities’.

You can think of using LEAPS as ‘leasing’ options. You can take advantage of movements in stocks and ETF’s using LEAPS — which can be much more affordable and provide a lot more leverage.

AAPL Example

Let’s say you want to take a position in AAPL — but you don’t want to put up the amount of money it would take to create a stock position. You can instead use an AAPL LEAP option — let’s say an ‘in the money’ option with a fairly high delta — and due to the smaller amount of money needed to invest in this type of position — one could still create a much more affordable similar type position to take advantage of an opportunity.

Another great weekly options strategy that can be used will LEAPS options is use them as a stock ‘surrogate’ for a covered call type of position. Instead of using the actual stock as the base position for a covered call play — a LEAP can be used — and then the option trader can sell weekly options against that leap — potentially every single week — bringing in premium much like a covered call type position only with much less capital at risk. Also, if you were to compare these two strategies against one another — you would most likely find that the return on investment is far greater when using the LEAPS weekly options version.

To find out more about this strategy, visit this weekly option. website for tons of free training, videos, examples, and reports on weekly options trading .

This article was published on 17 Nov 2012 and has been viewed 520 times