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Investors need to approach this trading style knowing that they should only invest money they can afford to lose. It's essential to consider the possible downside and be prepared for outcomes similar to gambling at a casino, where losing the stake is a real possibility. While investing in LEAPS can amplify gains when the underlying stock performs well, it is also crucial to acknowledge that options can depreciate, leading to a total loss of the invested premium if the price does not move favorably by the expiration date.
Developing a Personal LEAPS Strategy
In discussing his own strategy for trading LEAPS, a system was described defined by several rules and principles that prioritize simplicity while aiming to maximize potential gains. The following points summarize these strategies: