Transcript Option LEAPS - CFA Society Root

Option LEAPS
Economic Timing
By Jason Schwarz
Buy and Hold
Economic Timing
• Warren Buffett, "I would consider a year in
which we decline 15% and the Dow declines
30% to be much superior to a year when both
we and the average advanced 20%."
• Steve Jobs, "You have to intercept a moving
train."
Since 2000
Economic Weather
• Fear
• GDP
• Retail/consumer
• Employment
• Housing
• Leading indicators
• Corporate revenue growth
• Earnings estimates
Investment Vehicle
• LEAPS
• Strike price (out/in the
money)
• Premium (intrinsic value +
time value + volatility value)
• Expiration date
Option LEAPS
• Stock replacement
• Diversification
• Tool for hedging
• Great way to make money, not keep money
Rules for Improving
• Fully invested
Economy
• Proper allocations
• Seek leadership
• Buy index on a selloff
• Double down by increasing risk
• Take profits
• Buy in anticipation of catalyst events
• Watch the economic weather!
Rules for Worsening
• Buy dips sellEconomy
rips/defense. Beware of falling
• Cash is home
knife
• Identify downward leadership
• Be leery of high premium-investors take
liquidity profits
• Cautious puts
• Slippery
• One year expiration
Current Conditions
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