Lecture on Selling LEAP Put Options

Introduction

• Flexing on money muscle: Presenter humorously flexes on money and muscle.
• Topic: Selling LEAP put options.

LEAP Put Options

• Definition: LEAP (Long-Term Equity AnticiPation) put options are long-term put options.
• Advantages: Generates a stable source of income over a prolonged period, good for lazy investors who want consistent income.

Example Stocks for LEAP Puts

• Palantir (PLTR):

  • Cheap to sell.
  • Example: Selling $20 puts for an expiration of Jan 17, 2025.
  • Delta around 0.34, suggesting a higher likelihood of profitability.

• Apple (AAPL):

  • High volume, stable stock.
  • Example: Selling $80 puts for Jan 17, 2025.
  • Lower returns (around 3%) but very safe.

Using Margin

• Misconceptions: Margin trading is often misunderstood as very risky.
• Risk Reduction: Safe if done correctly. Suggested for experienced traders.
• Brokerages:
  • Robinhood: Allows use of 50% of the portfolio as margin.
  • TD Ameritrade and Schwab: Also provide significant margins.
• Strategies on Margin: Used on larger, blue-chip stocks like SPY.

Detailed Strategy

• Delta: Lower Delta (e.g., 0.34) is better for LEAP puts to reduce the risk of assignment.
• Long-term Perspective: Generally, stocks tend to increase in value over the long term.
• Portfolio Diversification: Can be used alongside shorter-term puts to provide balance.

Real-World Examples

• Tesla (TSLA): Sold LEAP put options temporarily hit in-the-money but overall profitable.
• S&P 500 (SPY): Selling LEAP puts on SPY is seen as an excellent strategy due to its comprehensive market representation.

Financial Goals and Returns

• Variety of Expectations: Different investors have different annual return goals ranging from 3% to 75%.
• Caution on Tying up Capital: Recommended to use margin to avoid tying up significant capital for low returns.

General Advice

• Consistent Income: Selling put options is a consistent strategy to generate income.
• Margin Utilization: Use margin after exhausting your actual capital for additional returns.
• Mindset: Success requires the right strategy, mindset, and willingness to learn and improve.

Conclusion

• Advice: Sell puts often, use margin for extra returns, diversify with blue-chip stocks.
• Private Clients Offer: Opportunity to book personal coaching sessions, especially for those with a higher net worth portfolio.