You don't want to bother picking individual stocks. You want to tie your money to moves in the overall market. Essentially, you want to invest in the fortunes of an index (which, if you don't know, are tracking mechanisms that represents a basket of stocks, allowing investors to follow either the overall market or a particular segment).
Index roll provides one possible strategy to marry your investment fortunes with a particular index. The process involves LEAPS, or Long-term Equity AnticiPation Securities. These contracts represent options that have longer-term expiration dates, ones of more than a year.
The "roll" part comes in by continually replacing these LEAPS as expirations comes up. You keep exchanging one for another with an expiration date further into the future. Like...on a rolling basis.
By purchasing a rolling series of LEAPS for the same index, you can track the moves in the underlying index. Meanwhile, because of the structure of option contracts, the strategy gives the opportunity to outperform the index by taking advantage of leverage. LEAPS are cheaper than purchasing a corresponding ETF outright, meaning that you can increase the gains using the index roll structure.
Related or Semi-related Video
![Finance: What is a Country Basket (Index Fund)?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.694_770x433.jpg)
Finance: What is a Country Basket (Index...30 Views
Finance, a la shmoop. What is a country basket index fund?
All right we're picking daisies, marigolds, lilies so uh how do we [Pictures of flowers]
rephrase in Italian? Like, we want to fill a portfolio basket with just stocks [Pouring a glass of red wine]
representing the overall financial health of Italy. Is Italy healthy? While
they smoke a lot they drink a lot of wine they eat a bunch of pasta but there
always seems to be a woman from some small village who's celebrating her [Old woman at a birthday party]
117th birthday over there. Well a country basket is just an index fund of
stocks representing a country. Like we're doing Korea... South we're gonna have
in that basket dunno some Samsung, a load of Daewoo, a hunk of Hyundai and some [Company stocks being added to the basket]
nice barbecue on the side. That'd be our Korean country basket and it's a good
basket to fill if you're just bullish on a country but not really sure which
flower on which to place your bets. It's like instead of trying to decide between [The stocks in the basket turn into flowers]
roulette or poker or slots... Well you just buy stock in Las Vegas
Sands you know you bet on the entire casino, and bueno Fortuna you know good [Someone checking their cards in a casino]
luck there pal, doesn't the house always win? Yeah so why do people keep going there?...
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