When are the best times to buy LEAP Call Options?
The best market conditions to buy LEAPS (Long-Term Equity Anticipation Securities) depend on your strategy, but in general, you want to buy LEAPS when implied volatility (IV) is low, the stock is undervalued or in an early-stage uptrend, and market conditions favor long-term growth.
Best Market Conditions to Buy LEAPS:
1. Low Implied Volatility (IV)
LEAPS are sensitive to IV crush, so you want to buy when IV is low and expected to rise.
Avoid buying before earnings or major events where IV is high—post-event IV crush can hurt you.
Best time: After earnings, market corrections, or during periods of low volatility (e.g., summer doldrums).
2. Market Bottoms or Pullbacks (Not Full Bear Market)
Buying LEAPS near a market bottom or during a pullback in an uptrend gives you a better entry point.
If the market is in a strong downtrend, wait for signs of stabilization (e.g., moving averages flattening, RSI divergence).
Best time: During market dips or when a strong stock pulls back to long-term support (e.g., 200-day MA).
3. Bullish Long-Term Outlook
LEAPS work best in a strong bull market or when a stock is entering a long-term uptrend.
Look for industries that have secular growth trends (e.g., AI, semiconductors, cloud computing).
Best time: When macroeconomic conditions favor risk-on assets (e.g., Fed rate cuts, fiscal stimulus, growth phase of economic cycle).
4. High Growth Stocks at Discounted Prices
LEAPS are capital efficient when a stock is undervalued but poised for long-term growth.
Look for strong fundamentals, rising earnings estimates, and price stabilization after a decline.
Best time: After a broad market correction or sector-specific selloff when the stock is oversold.
5. Low Interest Rate Environment
LEAPS are sensitive to interest rates since they are long-duration instruments.
When interest rates are falling or expected to stay low, LEAPS become more attractive.
Best time: When the Fed signals rate cuts or a pause in rate hikes.
Best Stocks for LEAPS
Look for: ✅ Strong earnings growth
✅ Expanding margins
✅ Market leadership in a growing industry
✅ Rising institutional ownership
