• Nyfure@kbin.social
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    8 months ago

    a call Option that follows the S&P500 over the course of 3 years? That’s a pretty safe bet.

    As long as it rises higher than the strike price + premium.
    If it just rises (your “safe bet”) as expected (and never far enough above the strike + premium or you didnt exercise), you loose and the contract gets worthless.

    Now i havent traded LEAPS yet, but based on what i have learned, i dont understand why someone would sell you such a contract and even if, someone else would love to jump onto that “safe bet”, if it was that safe. That someone will most likely not be you.

    As far as i can see, its a bet that the broker who sold you the option was wrong/too low about expected growth.
    Thats risky, potentially loosing the whole savings as you paid the premiums. Leverage sounds good when its positive, but also works negative…