Leaps with high DTE

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Heather Cullen

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  • #16640 Reply
    Olivier
    Guest

    Hello everyone,

    In the book it seems like the recommended expiration for leaps is ~1 year, and we sell it with ~45 days left to keep some theta.
    Why not buy a leaps with a 3 years expiration, like SPY 17DEC27. We can then well this leap in 1 year and buy another leaps 3 years in the future. The way I see it, we can benefit from the movement in the collateral since delta is close to one but theta lost would be at a minimum. Of course the leaps will be more expansive because we are buying 2 more years, but we will get that money back when we sell it.

    What does everyone think of this?

    #16641 Reply
    Tim
    Guest

    I think it’s a good idea, but I guess it’s a trade off between having less theta risk as much longer until expiry but at a cost of higher premium. I think if your account is large enough I can’t see much downside to this strategy

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