Most readers of my blog have probably read Greenblatt's The Little Book That Beats The Market, but I'm not sure how many of you have read his earlier book How To Be A Stock Market Genius. In many ways I like his first book better, for example its focus on special situations is of a particular interest to me. One such situation is the use of LEAPs (Options with longer expirations) to simulate Stub stocks. Jamie has conducted a bit of research using the MFI screen and LEAPs; though not statistically significant, I found her research interesting. Here is a link and an excerpt:
I wondered a while back whether buying LEAPs would be a way to leverage the MFI for greater gains. On August 8, I recorded the 38 MFI stocks that had options available. For each stock, I recorded the close price, as well as the close price of Jan. '07, '08 and '09 LEAPs with a strike price just below the close price of the security.I'm interested in your thoughts and experiences on LEAPs in general and on their application to the Magic Formula. I have used them with great success on Investopedia's simulator game, but I have never used them in real life. Beware of the bid/ask spreads as it can get very pricey!
4 comments:
A nice discussion is developing at the site of the initial post, please join in: http://investoblog-j.blogspot.com/2006/12/my-experiment-in-leaps.html
This is a better link to the discussion.
hi nick,
thanks for linking to my post, and for the ongoing discussion on my blog. can you tell me more about the investopedia simulator?
Jamie-
Follow this link to learn more about the simulator: Investopedia. I use their service to challenge my co-workers to investing contests quarterly. Additionally, I've used it to practice techniques I'm not yet comfortable using, LEAPS, margin, short selling, etc...
Let me know what you think.
-Nick
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