2 Stocks I’m Buying Long-Term Leaps For
Do you know what it means to buy a leap? This refers to long-term put or call options contracts for a particular underlying asset. Usually, it refers to buying call options in a bullish long-term trade. I don’t do it often but at the beginning of each year I like to look at where stocks are trading and if I think it might be worth going extremely long on them. This will make more sense if you have some experience with options.
Essentially, this means you are bullish on the stock long-term and over the next year or two, you expect the price of the stock to surpass the strike price of your leap contracts. Translation: being extremely bullish on the stock. Here are 2 stocks I’m considering buying leaps for to start 2024.
Uber (NYSE: UBER)
Nothing says being Uber-bullish like buying leaps in Uber! Before 2023, you couldn’t pay people to buy Uber stock. Shares were stagnant from the IPO back in 2019 and even after this year’s growth, the stock has only returned about 50% over the past four years. That’s a fine return but not what you would expect from a high-growth stock.
But everything changed in 2023 when Uber finally reached profitability. Like Amazon ($178.22|0.83%), it was something that many people were skeptical of ever happening. Now that it has, everyone wants to be a long-term Uber investor, me included.
Other catalysts have me interested in Uber’s floor as an investment. It was included in the S& 500 this month which is always a stabilizing force for stocks. This means that Uber’s stock will always be bought and sold with major ETFs like SPY or VOO. Am I buying the stock now? No. It’s climbed by 42% over the past six months which might not be a lot for other stocks but for Uber that’s parabolic. I’ll wait for a pullback first or, I’ll just buy some 2025 or 2026 call leaps. I firmly believe Uber will be trading for well higher than it is now by 2026.
This is more of a speculative long-term investment. We know how volatile the electric vehicle industry can be so I wouldn’t recommend this for risk-averse investors. The writing is on the wall: Tesla (NASDAQ: TSLA) is going to be hard to knock off as the EV industry leader. But that doesn’t mean there isn’t room for others to thrive. As of now, I want to place my money on an EV-focused company like Rivian, rather than a legacy automaker like GM (NYSE: GM) or Ford (NYSE: F).
Rivian has more than just its SUVs and trucks going for it. The company has a valuable contract with Amazon ($178.22|0.83%) to produce its electric delivery trucks which should help support Rivian until it can produce a mass-market vehicle to compete with Tesla. Rivian has improved production levels and narrowed its losses in each quarter and I’m banking on them to be a more valuable company two years from now.