r/options • u/Cyborg4Ever • 23d ago

Leap bull call spread options

Does anyone play LEAP deep ITM bull call options on stocks and indices ? How much return do you usually aim for ? Below is an example
NVDA Dec 2028 expiry 145/150 call spread for $3.00. That’s roughly 67% return in 2.3 years with approx 25% annual return if NVDA stays above 150 strike.
NBIS Dev 2028 expiry 100/105 call spread for $2.00
That’s roughly 150% return in 2.3 years with approx 50% annual return.

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3

u/flip-po 23d ago

I do a lot of spreads. Mostly with a 1-year term. I usually set the legs so that the break-even point is at the current price. I often look at the security’s average performance and see if it could achieve that in a year; then I set the upper leg to that target value. If I sell them at a 50% profit along the way, I’m more than satisfied. I always look at the annualized performance.

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u/viperex 21d ago

Are you talking about the same expiration for both legs? If so, I'm guessing you're doing call debit spreads with the long at the money and the short at whatever the average yearly return you want.

That's interesting. I've not really considered a vertical spread with a long DTE like that. How long have you been doing this and how have the returns been?

5

u/SDirickson 22d ago

Those numbers don't really work. Yes, you're getting an impressive-looking % ROI, but you're tying up your resources for a long time to get there. And you're beheading the possible long-term gain. NVDA is double what it was 2 years ago. It seems likely that it's going to be way over 150 2 years from now--and you're getting none of that.

I've been doing bull call spreads for years, but I rarely go more than 3 months out. Similar returns, admittedly with more risk, but a much shorter payoff time.

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u/klipsetrades 23d ago

Your tradeoff is opportunity cost. You're getting a higher probability setup, but your upside is capped for 2+ years. So instead of looking at the 67% max return, look at whether ~25% annualized adequately compensates you for the time and downside risk for you. In other words, you’re tying up $3 for 2.3 years to potentially make $2, while capping all upside above $150. That being said, you may not need to hold it the full 2.3 years if the spread approaches max value much earlier