How to Find Perfect Stocks for Leap Options (Step-by-Step)

About this video

• Video Title: How to Find Perfect Stocks for Leap Options (Step-by-Step)
• Channel: Matt Giannino
• Speakers: Matt Giannino
• Duration: 00:12:22

Overview

This video explains a step-by-step framework for identifying and selecting stocks suitable for LEAP (Long-Term Equity Anticipation Securities) options trading. The speaker emphasizes developing a strong thesis, analyzing fundamental and technical indicators, and shares examples like PayPal and BABA to illustrate the strategy. The goal is to teach viewers a repeatable system for successful long-term investing in options.

Key takeaways

• Identify Strong Companies: Focus on companies with a history of increasing revenue over at least five years and stable, ideally increasing, profit margins. These companies demonstrate a competitive edge and ability to reinvest profits for long-term growth.
• Analyze Valuation (PE Ratio): Look for companies with a low Price-to-Earnings (PE) ratio, ideally around 15-20 or lower, relative to their historical performance and industry peers. This indicates the stock is potentially undervalued.
• Chart Analysis (RSI): Utilize the Relative Strength Index (RSI) on weekly and monthly charts, looking for readings around 30, which signifies oversold conditions and potential buying opportunities.
• Combine Fundamentals and Technicals: A "no-lose" strategy emerges when a stock is fundamentally strong and undervalued, and its chart shows oversold conditions with potential for momentum.
• Recognize Momentum: While buying during consolidation phases can be difficult, identifying when a stock starts to trend and build momentum after a period of sideways movement can lead to significant gains.
• Learn a System, Not Just Trades: The ultimate goal is to develop a consistent trading system rather than just following individual trade recommendations, ensuring long-term success.