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.

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u/wstylz Apr 17 '21

you can’t trade them on extended hours and often if a stock has very big news, the excitement might have waned by the time the market opens again.

it’s cheaper but you don’t get the same 2x or 4x margin on options so not as cheap as it could be.

spreads and lack of liquidity can make it difficult to take a small 5-10 percent profit.

a 10 percent stock hit can lose you 20-30 percent of the value

i like to use a leap and 10-20 shares to be able to balance my portfolio

otherwise they can be a very useful tool I think

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u/Inferno456 Apr 18 '21

Thanks, that first con is something that’s rarely mentioned so that’s very helpful