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

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CHAPTER 14Trade Groups of Stock with LEAPS Index Options

Many years ago we knew a trader who always had opinions about the market. When she was bullish on the market, she would buy IBM stock, buy call options on Superior Oil, and/or sell puts on Merck. You already know the outcome. IBM’s stock price would short-circuit based on PC sales (2 to 3 percent of the company’s sales volume). Superior would skid, based not on how Superior was doing but on the value of Texas sweet-light crude oil. The price of Merck would need a transfusion based on a clinical trial over at Abbott Labs. The market would of course rally 7.5 percent faster than you could say, “What’s up?” Are you one of these investors, who “knew the market was heading up” but didn’t take ...

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