190. How to make at least 50% return per year with LEAPS options - Make 50-200% return per year - Turn $1,000 into $1 million in 17 years time, or turn $10,000 into $1 million in 12 years time
This idea is supergenius!
This is a zero-risk options strategy to make at least 100% return or 0% return (in case you fail) each 6 months.
As following:
Suppose, for a particular stock, we buy 2 LEAPS call options, 1-year duration,
And, for that same stock, we buy 1 LEAPS put option, 1-year duration
So we bet on a rise in the stock price, if the stock rises by 10%, we make 2 times 100% return on the call options, and we lose 1 time 100% return on the put option. So we make about 100% return when the stock rises by 10%.
Suppose the stock stays flat for 1 year, we may lose our whole investment, so we close the options deal each 6 months, when it goes up, down or stay flat, so we lose 40% of our investment back if it stay flat for 6 months (due to time value, both call and put options slowly decay, but this is unlikely the stock remains flat).
Suppose the stock goes down by 10%, we lose the investment on the call options, but we double the return on the put option, so we have 0% return, we didn't make money neither we lost money.
So each 6 months, we close our options strategy. So if we are right and the stock rises by 10%, we make 100% return in 6 months time, if is stays flat, we lose 40% of our investment (due to time value, both call and put options slowly decay, but this is unlikely the stock remains flat), if the stock goes down by 10%, we make our money back.
This is very lucrative! We invest each month or several months, we put $1,000 of investment into 2 call LEAPS options and 1 put LEAPS option, and chances are we double our money if our bet is right each 6 months. So we could double our investment again in 1 year time if the stock rises 10% or more 6 months later again.
If you are bearish, you can do the opposite, you buy 1 call LEAPS option and 2 put LEAPS options, and if the stock goes down 10% in 6 months time, you double your money, if it goes down another 10% more 6 months later again, you again double your money!
So make a list of stocks that you believe will rise in price alot in 6 months time, and each time you invest $1,000 in 2 call LEAPS options and 1 put LEAPS option.
It is possible the stock moves up 20% in 6 months time, then you already 4-fold your investment, or when it moves down 20%, you double your investment!
So the more volatile the stock, the more money you can make.
Suppose you invest $1,000 each year, then at 50% return per year you get:
0 1000
1 1500
2 2250
3 3375
4 5062
5 7593
6 11390
7 17085
8 25628
9 38443
10 57665
11 86497
12 129746
13 194619
14 291929
15 437893
16 656840
17 985261
After 17 years, you turned $1,000 into close to $1 million.
Or , after 12 years, you turn $10,000 into $1.29 million.
Look at it this way: the put option is insurance in case your bet is wrong and the stock goes down, same like a protected put on a stock.
It is even more interesting to use 2-year LEAPS options, (and you close the options after 1 year), then chances the stock remains flat is even less, plus you can only lose up to 30% of your investment (2 year LEAPS versus 1 year LEAPS is small price decay), plus you make more money because the stock may move up or down by 20% or more, you make 100%+ up and down!
Then this strategy is also interesting for trending stocks like Apple (AAPL).
You can also simply buy 1 call LEAPS and 1 put LEAPS option (a regular straddle) on 2-year expiration, and you close your position after 1 year. Due to time decay the maximum you can lose is 30%, but on the upside and downside you could make 100%+, if the stock moves by 20% or more! That's the easiest solution.
Talk to an options trader, he will explain you this is a great strategy to make money almost risk-free!
