LEAPS as investment

[bandlab2]

LEAPS are long term contracts with atleast more than 1 year ahead. we have nifty options for Jun 2011.

Let us say i have 1 lakh rs to invest. I am prepared to lose this 1 lakh if needed. I buy Jun 4500 call at 500 rs premium. I buy 4 lots for 1 lakh. now if nifty goes above 5000 by Jun 2011, i make money. If it stays below 4500, I lose all 1 lakh. in betwen i lose proportianately

I need not wait for Jun 2011. i can square off whenever i get profit.

Jun 2011 series is active. some LEAPS are not so active.

If nifty touches 7000 by 2011 jun, my profit will be 4 lakhs.
If nifty touches 6000 by 2011 jun, my profit will be 2 lakhs
If nifty touches 5500 by 2011 jun, my profit will be 1 lakh

these are very good investment options, only issue is you may lose all money. ofcourse you can hedge in opposite side, buy some deap puts as hedge. but in some cases you may lose capital as well as hedge

 

[anandktripathi]

But how to purchase that???
I am using RMoney and in that I can't buy that much long options.....
Suggest what should I do for the same???

 

[bandlab2]

icici doesnt have them either. i bought from 5paise

 

[AW10]

One strategy is to keep writing short term calls against LEAP. It is sort of creating a calender spread. As trader is writing a call which is protected by long position, it helps in reducing margin on short term obligation and effective risk management.

Don't know if it will work in our market where 1) liquidity in LEAPS is poor 2) Brokers don't provide margin on Net position risk.

Happy Trading

 

[ariyan_6n]

Friends,

Can any one update me on the Brokers who offer Trading in LEAPS.....
I accept the suggestion of 5 paisa....but the sales people are not aware of LEAPS....
Somebody using 5 paisa....plz update

"When you say 'may be' you are just Hedging"

Awaiting replies, i remain...
A.K.R.Arun

 

[bandlab2]

LEAPS is not a popular word in india, so brokers and their employees will not know. just look for all the options at vairious months. download the master and see it there.

some brokers dont offer them as some traders used to write these, collect huge premium, use it in current month. brokers have to maintain them for so many months, their risk mgmt dept has some extra work

 

[pasha]

Just be very wary of buying any option where liquidity is a problem, this even applies to options 60 days out. As long as the option is OTM there is no problem, but if it goes 300 points or more ITM there are no buyers or sellers.