Make Long Term Profits With Leaps

Buying leaps can be a very effective long term way to leverage your money in the stock market. Buying a leap can produce greater gains than just buying the stock and holing it. nn Let us look at an example of how it works. We find that stock XYZ is currently trading at $45. It is a strong stock and should go up. So we buy the stock at $45. Then we wait as the stock steadily goes up. Finally after 2 years the stock is trading at $90. We just made a 100% increase in 2 years. Awesome, but I am sure you could have made more money if you leveraged it. nn Let’s see, options are the way to leverage your money in the market. If you pay $3 buy the right to buy a stock at $45 and it shoots up to $90 you just made $45 from that $3. That is a giant return. But options expire within 1-3 months. The odd of a stock shooting from $45-$90 in a couple months is pretty darn slim. You want leverage with a little more time. nn That is why the leap appeared. Leaps are simply an option that has a lot more amount of time before it expires (1 to 2 years). Now we can buy the right to buy stock XYZ at $45 within 2 years. We pay a little more, maybe $15 for this option. nn Since we bought more time we can afford to wait a while for the stock to move up. We are not in a rush for the stock to move. After 2 years stock XYZ is worth $90. We can buy it at $45 and sell it at $90. Off of that $15 we made $45. This gives us a 300% return on our money. This gives us an edge over buying the stock which would have given us a 100% return. For more information on how to make money in the stock market visit http://www.stocks-simplified.com