Been doing my research on LEAPs and different rules people use for picking contracts. Seems most people like to keep their delta around -. 70 and take pretty deep ITM contracts.
I like the high probability and lack of theta decay, but I'm struggling to find options that have any volume; I'd say 3/4 of blue chip stocks I've reviewed for LEAPs have no volume on any high delta contracts.
Is the strategy there just to buy and hold until expiration, and hope the volume increases as time goes on? Or even just let the contract exercise? Am I better off focusing on indexes VS individual stocks?
Buying Leaps far ITM, with no liquidity?
byu/Spartansam0034 inoptions
Posted by Spartansam0034
6 Comments
If you buy the 70 delta call, you’re eating the premium on the 30 delta put, and lifting the offer on a wide market… you will get a lot tighter market just buying the 30 delta put and buying stock with it, and the same pnl but more liquid contracts with tighter markets
Deep ITM LEAPs with no volume, huh? Sounds like a recipe for slippage and a headache if you ever need to exit the position.
Instead of chasing those, maybe look at options on ETFs that track the indexes you’re interested in. They tend to have more liquidity.
Can you say more about why you are concerned about volume? There is a common beginner misconception that an ITM option could be impossible to sell. The reality is, all ITM options always have a bid. There is a slight chance that when you go to sell, you might not *quite* be able to get parity (i.e., the amount of intrinsic value the option “should” have,) but even if this happens, if your position is profitable, the difference would be only a small fraction of your profits.
I would stay away from
Any option without high OI. The b/a spread will be far too wide. And even Hugh delta leaps decay.
Consider a liquid underlying, and selling premium rather than buying. In that case you are looking for a bullish position try selling a put or put spread to limit risk. GL.
The sweet spot is .90 delta . try that
no you don’t hold till exp.
The idea is you buy them out about 9 month maybe a year
and only hold them for 3 month before selling them back for a profit (if it goes up of course) , The decay is minimal and it like owning the stock on the cheap, forget all thsi synthetic nonsense , that is absurd for a beginner and it costs more
Volume for leaps isn’t usually a thing in the short term. There is usually a bid and an ask as generated by the market makers. Almost always you can buy the leap if you do a limit order at the midpoint of bid and ask