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Understanding LEAPS: Using the Most Effective Options Strategies for Maximum Advantage by Allaire

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CHAPTER 4Buying LEAPS Calls as a Trading Strategy

For most traders, buying calls is the strategy through which they first get their feet wet in the options market. This should not come as a major surprise; most new investors are attracted to equities during bull markets, and so are most new option traders. And all of the options textbooks describe buying calls as the most basic bullish option strategy.

But if the choice of a trader’s first option strategy is relatively straightforward, its execution is somewhat more complex. How much capital should be committed to any given position? Which expiration month should be purchased, and which strike price chosen? When does one exit the strategy or take follow-up action? These are some of the questions ...

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