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LEAPS

LEAPS. Long Term Equity Anticipation Securities. LEAPS. Basically a Long Term Option Minimum of 1 Year Out Maximum of 3 Years Out Excellent Investment Tool For Retirement Accounts Advantage of Leverage Ideal for Conservative Investors. Searches/Selection . Investools Big Chart

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LEAPS

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  1. LEAPS Long Term Equity Anticipation Securities

  2. LEAPS • Basically a Long Term Option • Minimum of 1 Year Out • Maximum of 3 Years Out • Excellent Investment Tool For Retirement Accounts • Advantage of Leverage • Ideal for Conservative Investors

  3. Searches/Selection • Investools Big Chart • Future Industries/Sectors That Will Remain Strong • Bullish Searches • Strong Stocks in Multiple Time Periods • Great Earnings, Sales and Cash Flow Growth • Growth Stock Strategy #1 • Growth Stock Strategy #2 • Global Search • Customize • IBD (Investors Business Daily) 100

  4. Strategies • Can Be Used on Traditional Stocks or on Equity Indices • Alternative to Outright Stock Purchase • Can Be Used on Stocks That Have Recently Split • Can Sell a Current Month Call on a Future Position (Like a Covered Call)

  5. Traditional Stock/Equity Index • Not All S/E Have LEAPS – CBOE • Are High Premium Because of Longer Period of Time Value • Break Even Point at Expiration Higher Than Usual • Examples: POT, RIMM, GG

  6. POT – Potash Corp 12/3/07 • Straight Purchase • $123.84 for 100 Shares = $12,384 • LEAPS Purchase January 2010 (Exp 774) • Deep In The Money vs Out of The Money • Investment Diff = $1250 / B/E Diff = $17.50 • Deep In The Money • $100 Call $52.30 Premium = $5230 B/E $152.30 (Mine was 70c @ $37 on 9/12/07) • In The Money (ITM) • $110 Call $47.80 Premium = $4780 B/E $157.80 • At The Money (ATM) • $120 Call $43.60 Premium = $4360 B/E $163.60 • Out of The Money (OTM) • $130 Call $39.80 Premium = $3980 B/E $169.80 • Straight Purchase vs LEAPS Purchase • Investment Diff = $7154

  7. RIMM – Research In Motion • Straight Purchase • $104.75 for 100 Shares = $10475 • LEAPS Purchase January 2010 (Exp 774) • Deep In The Money vs Out of The Money • Deep In The Money • $90 Call $45.85 Premium = $4585 B/E $135.85 (Mine was 70c @ $33.40 on 9/12/07) • In The Money (ITM) • $100 Call $42.05 Premium = $4205 B/E $142.05 • At The Money (ATM) • $105 Call $40.30 Premium = $4030 B/E $145.30 • Out of The Money (OTM) • $110 Call $38.60 Premium = $3860 B/E $148.60 • Investment Diff = $725 / B/E Diff = $12.75 • Straight Purchase vs LEAPS Purchase • Investment Diff = $5890

  8. GG – Gold Corp 12/3 07 • Straight Purchase • $32.58 for 100 Shares = $3258 • LEAPS Purchase January 2010 (Exp 774) • Deep In The Money vs Out of The Money • Deep In The Money • $20 Call $15.80 Premium = $1580 B/E $35.80 (Mine was 20c @ $11.30 on 9/12/07) • In The Money (ITM) • $30 Call $10.40 Premium = $1040 B/E $40.40 • At The Money (ATM) • $35 Call $8.40 Premium = $840 B/E $43.40 • Out of The Money (OTM) • $40 Call $6.70 Premium = $3860 B/E $46.70 • Investment Diff = $2280 / B/E Diff = $10.90 • Straight Purchase vs LEAPS Purchase • Investment Diff = $1678

  9. Split Strategy • Check News for Split Calendar • Monitor Strong Stocks That Are Nearing Split • Use Investools Split Analysis (Basic Stocks) • As a General Rule the LEAPS Split Strategy is Best for a 2 for 1 Split • Historically a Stock Will Achieve Its Prior Split Value in 24 Months Time • Purchase LEAPS Shortly After Post Split Depression

  10. Sell Current Month Call • Another Way to Increase Account Value • Similar to Stock Covered Call • Allows For Partial to Full Recouping of Original Premium for LEAPS • Want to Sell as Far Out of The Money as Possible to Preserve Original LEAPS • Want to Expire Worthless to Keep Premium • Examples: POT, RIMM, GG

  11. POT 12/3/07 • POT Trading @ $123.84 • Dec 145 @ $1.10 • Dec 140 @ $1.67 • Dec 135 @ $2.60 • Dec 130 @ $4.05 • Dec 125 @ $5.95

  12. RIMM 12/3/07 • RIMM Trading @ $104.75 • Dec 130 @ $1.77 • Dec 120 @ $3.48 • Dec 115 @ $4.72 • Dec 110 @ $6.35 • Dec 105 @ $8.47

  13. GG 12/3/07 • GG Trading @ $32.58 • Dec 40 @ $.07 • Dec 37.5 @ $.20 • Dec 35 @ $.58

  14. More Examples • My Personal Account 12/3/07 • POT • 9/12/07 70c @ 37, Mark 67.55 Profit $3055 • Investment = $3700 Return = 82.57%/3 = 27.52% Monthly or 330.28% Annually • If Straight Purchase on 9/12/07 @ $89.00, Current Close Price $123.84 = $3484 Gain, Return = 39.15%/3 = 13.05% Monthly or 156.6% Annually

  15. More Examples • My Personal Account 12/3/07 • RIMM • 9/12/07 70c @ 33.40, Mark 54.475 Profit $2107.50 • Investment = $3340 Return = 61.31%/3 = 20.44% Monthly or 245.25% Annually • If Straight Purchase on 9/12/07 @ $85.00, Current Close Price $104.75 = $1975 Gain, Return = 23.24%/3 = 7.75% Monthly or 92.9% Annually

  16. More Examples • My Personal Account 12/3/07 • GG • 9/12/07 70c @ 11.30, Mark 15.60 Profit $430 • Investment = $1130 Return = 38.05%/3 = 12.68% Monthly or 152.2% Annually • If Straight Purchase on 9/12/07 @ $27.00, Current Close Price $32.58 = $558 Gain, Return = 20.67%/3 = 6.89% Monthly or 82.67% Annually

  17. I Am Sold on LEAPS • More Conservative Approach • Excellent Tool for IRA, IRRA, 401k • Q & A • Comments

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