The Rules for Entering a New LEAPs Position

As presented by Hooper and Zalewski in their book Covered Calls and Leaps, a Wealth Option, here are the rules for entering a new Leaps position. Remember, Leap is just another word for long-term option, and while covered call writing delivers returns in the 4 - 6% a month range, Leaps can deliver returns in the upper single digits to low teens for an approximate return close to 100% a year.

The Rules for Entering a New Leaps Position

1. You can only establish new positions on down market days. A down market day is any time the Dow and NASDAQ are in the red.
2. Use the CSE screener, provided by Hooper and Zalewski at www.compoundstockearnings.com, to filter all stocks in the market for the fundamental criteria for LEAPs investments.
3. You must follow the rules for correctly constructing a LEAPs position (discussed later). These rules are imbedded in the CSE screener.
4. Ensure that the stock adheres to the buying low rule for LEAPS (discussed later).
5. Always give priority to maintaining acceptable levels of diversification between stocks and industries (invest across the 13 varying sectors) - even if a stock you are already invested in presents an excellent opportunity.
6. Buy the LEAPs first and then immediately sell the call. Do not hesitate.

Again, the previous information is presented in Hooper and Zalewski's book Covered Calls and Leaps a Wealth Option ... an invaluable resource for anyone who wants to be financially independent.