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

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CHAPTER 15Buying LEAPS Index Calls

You watch your favorite business program on TV after work this evening, and you see that the NASDAQ was off 25 points, the Dow Jones Industrial Average (DJIA) was up 41 points, and the S&P 500 was up only 4 points. As an investor or speculator, what opportunities are there to trade these baskets of stock? In particular, can buying index LEAPS calls play a part in your long-term investment plan?

Let’s take the DJIA and look at the performance of each of the components in today’s trading session. Although the DJIA was higher by 41 points, not all of the 30 stocks participated in the advance. Today’s results showed that 21 stocks closed higher, 5 closed lower, and 4 were sharply unchanged. What does this mean to ...

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