5 Reasons Your LEAPS Strategy Isn’t Working – And How to Fix It
If you're using LEAPS (Long-Term Equity Anticipation Securities) as part of your covered call or Poor Man's Covered Call (PMCC) strategy and still not seeing results, you're not alone. In his latest video, seasoned investor Mark Yegge breaks down five core reasons why your LEAPS strategy may be underperforming—and how you can adjust to get better returns.
Let’s explore these critical factors:
- You’re Not Accounting for Bearish Moves
Many investors focus only on upside potential. But as Mark points out, stocks go down faster than they go up—and your strategy needs to prepare for that.
If your LEAPS or synthetic position declines with the stock, you’ll want to ensure you're already in the money (ITM) with your short calls. Why? Because in-the-money covered calls act as a cushion during a downturn. They allow you to recover more premium from the call option and offset losses on the long LEAPS position.
💡 Tip: When markets look uncertain, lean into in-the-money short calls to build protection into your synthetic position.
- You’re Not Managing Trade Timing Well
LEAPS require strategic timing for both entry and ongoing management. If the stock drops and you don’t adjust quickly—like rolling your short call down or closing the position—losses can snowball.
In the video, Mark demonstrates that a $5 stock drop without adjustments can leave you with a $410 loss, especially if you're using out-of-the-money calls with little intrinsic value.
🛠️ Fix: Monitor positions regularly. Don’t "set and forget." Adjust your calls based on market movement—especially during pullbacks.
- You’re Ignoring the Power of Delta
Delta is crucial in synthetic and diagonal spreads. When your LEAPS have a high delta (e.g., 0.80), your position behaves more like owning the stock itself. But when paired with out-of-the-money calls (low delta), you're not getting sufficient protection.
Mark explains how the $95 strike (ITM) short call cushions the portfolio more effectively than the $105 strike (OTM). It’s all about the delta difference—and being closer to at-the-money gives you more juice (time premium) and risk protection.
📊 Key Insight: High-delta LEAPS + mid-to-high-delta short calls offer balance and resilience.
- You’re Chasing Juice Without Considering Risk
Many traders love selling out-of-the-money calls for the extra "juice" (time premium). But Mark warns that this comes with increased risk during a downturn.
In a declining market, your OTM short calls lose their protection value quickly. You might collect a dollar today, but if the stock drops $5, you’re left exposed on your LEAPS. Meanwhile, ITM calls might only drop from $6 to $2, softening the blow.
⚠️ Lesson: Don’t sacrifice safety for extra premium. Match your risk appetite with your short call strike.
- You’re Not Using Proper Trade Adjustments
When things go wrong, many traders freeze. But as Mark emphasizes, adjusting is part of the strategy—especially in a PMCC.
If the stock drops, you can:
- Roll down your short call
- Switch to an ITM call for better protection
- Reassess your LEAPS position entirely
🧭 Action Plan: Build a checklist of possible adjustments and use them proactively—not reactively.
Life-Improving Tips for Better LEAPS Trading
To become more successful with LEAPS and Poor Man’s Covered Call strategies, integrate these practical habits into your trading routine:
- Create a Trade Journal
Track each LEAPS trade—including entry price, delta, strike selection, adjustments, and outcome. Reviewing past trades helps you identify patterns and avoid repeat mistakes.
- Use a Risk Calculator
Always know your max risk and breakeven point before entering a trade. Tools like options calculators or spreadsheets can help you evaluate your positions clearly.
- Set Reminders to Review Trades Weekly
Don’t just check your portfolio passively. Actively review your trades every week to spot opportunities for rolling or adjusting your short calls.
- Study Market Trends Before Selecting Strikes
If the market looks choppy or bearish, opt for in-the-money calls to stay conservative. Don’t fight the trend.
- Learn Continuously from Experienced Investors
Watching content from seasoned traders like Mark Yegge helps shorten your learning curve. Take notes, revisit key lessons, and implement gradually.
❓ Frequently Asked Questions (FAQs)
Q1: What is a LEAPS option?
LEAPS stands for Long-Term Equity Anticipation Securities. These are long-dated options (typically 1–3 years out) that provide cost-effective exposure to a stock.
Q2: Why use LEAPS instead of buying the stock directly?
LEAPS offer similar upside exposure to stock ownership at a lower capital requirement, making them ideal for traders using synthetic covered calls or Poor Man’s Covered Calls.
Q3: What does “juice” mean in options trading?
“Juice” refers to the time premium in an option. Out-of-the-money options often have more juice but offer less downside protection.
Q4: Should I always sell in-the-money calls for protection?
Not always—it depends on market conditions. In bullish trends, out-of-the-money calls may be suitable for maximizing profit. In bearish or sideways markets, in-the-money calls are safer.
Q5: How do I know when to adjust my trade?
Watch for key indicators like declining delta, falling premiums, or sharp moves in the stock price. Adjustments help you stay in control and limit losses.
📢 Call to Action
If your LEAPS strategy hasn’t been delivering the results you expected, now’s the time to reassess your approach. Start implementing what you’ve learned today:
👉 Review your current LEAPS positions.
👉 Evaluate your short call strikes—are they really offering protection or just juice?
👉 Subscribe to Mark Yegge’s YouTube channel for more deep-dive videos and proven investing strategies.
👉 Download a LEAPS trade tracker template to help you stay organized and accountable.
🏁 Conclusion
LEAPS can be a powerful tool for building wealth and generating income, but only when used with strategy and discipline. If your LEAPS strategy isn’t working, it’s often due to a combination of poor timing, incorrect strike selection, and a lack of proactive adjustments.
By embracing delta, managing downside risk, and staying flexible in your approach, you’ll put yourself in a stronger position to succeed—no matter what the market throws your way.
Start small, stay consistent, and let every trade teach you something new.
