LEAPS Lab

Most people trade options like lottery tickets. I use LEAPS differently. Not for gambling. Not for weekly calls. Not for 10x overnight dreams. I use Deep ITM LEAPS to gain long-term exposure to great businesses with less capital. High Delta. Long expiration. Lower theta pressure. More stock-like behavior. My rule: If I wouldn’t own the stock for 3-5 years, I shouldn’t buy the LEAPS. LEAPS are not “cheap stocks.” They are leveraged bets with an expiration date. Used wrong: they destroy you. Used right: they can amplify patience. $MSFT

Deep ITM LEAPS are not magic. They are a tool. Bad company + LEAPS = disaster. No risk control + LEAPS = disaster. Short-term mindset + LEAPS = disaster. But: Great business. Long duration. High Delta. Reasonable entry. Controlled position size. That can be powerful. I don’t use LEAPS to gamble. I use them to amplify long-term conviction.

My LEAPS exit framework: I don’t hold blindly until expiration. I consider trimming when: • Stock reaches my target zone • Delta becomes too high • Valuation becomes stretched • Thesis weakens • Better opportunity appears • Time to expiration gets too short LEAPS need a plan. Without a plan, leverage becomes emotion. And emotion is usually expensive.

I don’t chase LEAPS. My favorite setup: Great company. Temporary fear. Valuation compression. Long-term thesis unchanged. That is when Deep ITM LEAPS become interesting. The goal is not to buy excitement. The goal is to buy quality when the market is tired of it.

Why $MSFT fits my LEAPS framework: • Azure keeps growing • Microsoft 365 has massive enterprise lock-in • Copilot creates a new monetization layer • AI infrastructure demand is real • Cash flow remains strong • Balance sheet is durable I don’t buy $MSFT LEAPS because I think it will moon next week. I buy because I believe Microsoft can compound through the AI cycle. That is the difference between gambling and positioning.

My LEAPS checklist: I only consider Deep ITM LEAPS when the company has: • Strong free cash flow • Durable moat • Pricing power • Long-term growth • Low bankruptcy risk • Massive ecosystem • Real earnings, not just hype That is why I prefer quality mega-cap compounders. For me, LEAPS are not for weak companies. They are for great companies temporarily mispriced.

Deep ITM LEAPS are still risky. Never forget: • They can expire worthless • They lose value if the stock falls hard • They require patience • Liquidity matters • Spreads can be wide • You still need an exit plan LEAPS are not safer because they expire later. They are only better if your thesis is right, your position size is sane, and you survive the drawdowns.

Why I avoid short-term calls: Short-term options force you to be right on: 1. Direction 2. Timing 3. Volatility 4. Market mood That is too many ways to lose. Deep ITM LEAPS give me more time. I don’t need $MSFT to move tomorrow. I need the business to compound over years. Time is the edge. Not prediction.

The most important number in Deep ITM LEAPS is Delta. Delta tells you how much the option moves when the stock moves. A 0.90 Delta call means: If the stock rises $1, the option should rise roughly $0.90. That is why Deep ITM LEAPS feel more like stock. My preference: 0.80 - 0.95 Delta Too low = too much lottery. Too high = less leverage. The sweet spot is where the option still gives leverage, but doesn’t behave like a dying weekly call.

What are Deep ITM LEAPS? LEAPS = long-term options, usually expiring 1-3 years out. Deep ITM call = a call option with a strike price far below the current stock price. Why do I care? Because Deep ITM calls usually have: • Higher Delta • Lower time value percentage • Less theta decay than short-term OTM calls • More stock-like movement Example: If $MSFT trades at $400, a $250 or $300 strike long-dated call behaves much more like stock than a $500 OTM call. That is the whole point. I don’t want lottery tickets. I want leveraged ownership.

Deep ITM LEAPS Guide 🧵 Most people trade options like lottery tickets. I use LEAPS differently: Not for gambling. Not for weekly calls. Not for 10x overnight dreams. I use Deep ITM LEAPS to gain long-term exposure to great businesses with less capital. Think: High Delta. Long expiration. Lower theta pressure. More stock-like behavior. My rule: If I wouldn’t own the stock for 3-5 years, I shouldn’t buy the LEAPS. This is why I prefer Deep ITM calls on companies like $MSFT. LEAPS are not “cheap stocks.” They are leveraged bets with an expiration date. Used wrong: they destroy you. Used right: they can amplify patience.

Who is winning the AI boom? My ranking: 1. $MSFT — best AI monetization 2. $AMZN — biggest AI compute machine 3. $ORCL — highest AI infrastructure beta 4. $AAPL — still waiting for a real AI story Safest AI compounder: $MSFT Wildest upside: $ORCL AI is no longer just a product story. It is a cloud, compute, and infrastructure race.

AI boom winners: $MSFT = best AI monetization $AMZN = biggest AI compute machine $ORCL = highest AI infrastructure beta $AAPL = still waiting for a real AI story Microsoft is the safest AI compounder. Oracle has the wildest upside. Apple is not the AI winner yet.

$MSFT

$MSFT $GOOG Microsoft is better at turning AI into enterprise cash flow. Google is better at building the full-stack AI machine: models, TPUs, infrastructure, Search and Cloud. MSFT is the safer AI compounder. GOOGL may be the cheaper, more technical AI infrastructure bet. I own the business model. I study the chips.

@MSFT Bill Ackman sold Alphabet and bought Microsoft. Gates Foundation sold Microsoft. Microsoft director bought the dip. Institutions still hold Microsoft like oxygen.

$MSFT

$MSFT 发财机会

$MSFT around 22-23x earnings is exactly the kind of setup I want to study for Deep ITM LEAPS. Not because the chart looks good. It doesn’t. But because quality businesses rarely feel comfortable when they become interesting. AI + Azure + enterprise software. Long-term thesis intact.

$MSFT $MSFT