Series 7 practice questionmediumOptions — LEAPS Strategy
An investor who is long-term bullish on a stock but wants to limit capital outlay might consider which strategy?
- AWriting uncovered puts
- BBuying short-term put options
- CWriting covered calls
- DBuying LEAPS call options✓ Correct answer
Explanation
Why D — Buying LEAPS call options
LEAPS calls allow an investor to control 100 shares of stock for a fraction of the cost of buying the shares outright, with up to three years until expiration. This provides leveraged upside exposure with limited downside risk (the premium paid), making them suitable for long-term bullish investors seeking to reduce capital commitment.
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