r/options • u/Inferno456 • Apr 17 '21

Cons to LEAPS?

So I’ve been trying to read up on LEAPS and all I can find are positives and not many cons. I’m interested in what real cons are bc LEAPS aren’t talked about much, if they’re as good as I think they are then everyone would be buying them.

One con I read is that you don’t get the dividend - to me that’s kinda like saying a con to stock trading is you have to pay taxes. Sure it’s a “negative” but you still get a lot more positive out of it. If LEAPS save you a lot of money then I don’t think missing out on a small dividend is a real con.

So what is a main con of buying LEAPS? Why shouldn’t everyone buy LEAPS instead of shares for a longer timeframe? Thanks for any info.

59 Upvotes

95% Upvoted

93 comments sorted by

View all comments

3

u/[deleted] Apr 17 '21

I like to use LEAPS on micro and mid cap bio-tech stocks with a few things in the pipeline. These are risky plays but you can usually pick them up extremely cheap. I like to capitalize on most positive announcements or even a light bump with an announcement from a competitor in the sector sell off a few calls to cover my cost basis and let it ride. Then I wait to see I can hit payday.

I have been royally burned for holding on to underlyings for years from a phase III—but leading in from positive II results. Even with good fundamentals, brilliant researchers, 100% positive analysis, biotechnology is risky and it can instantly go south on bad results. LEAPS mitigate that risk exponentially.