Last week, I gave you my AI Power Stock List, my list of the best stocks in the AI space.
You all seemed very excited to get this list — more than a few of you wrote in to say, “I need more AI stocks!”
But now that you have this list in your hands, what should you do with these stocks?
Well, as a long-term investor, you could just buy them today and hold them indefinitely…
Or you could try the technique I’m using in my own portfolio.
The Best Way to Trade This Stock List
First, let’s take another look at the stocks we’re looking at:
(Full transparency, I already own three of the top five stocks on this list… wish I had bought more back when I did… anyway enough of the pity party. Let’s move forward…)
So, how can you invest in this list?
Well, as I mentioned earlier, you could always buy the stock outright, although that would be an expensive endeavor.
For example, you could put $1,000 into each of the top five stocks — for a total cost of $5,000 — but it would mean less than two shares of MSFT and about 60 shares of PLTR. Alternatively, you could aim to buy 100 shares of each stock… but that would cost nearly $35,000 JUST for Microsoft!
All in all, now we’re talking over $150,000 for a basic buy-and-hold strategy that should only represent a portion of your entire portfolio. Pretty pricey.
Instead of loading up on shares, let’s look at two strategies we can use to invest in AI without having to buy the stock first.
1) LEAP Call Options. A LEAP is an option that has more than nine months to expiration. Long-term options definitely have their advantages over buying shares outright, like their cost. For example, the MSFT December 2025 $350 calls are gonna cost $71 or $7,100 per contract. And unlike short-term options (which are also more affordable than simply buying shares), you have loads of time for the trade to work out in your favor — more than two years in the case of this MSFT option!
If MSFT skyrockets to $500, this LEAP would have at least $150 of intrinsic value, which means the contract would be worth $15,000. Subtract out the original cost of $7,100, and we’re left with a very nice profit of $7,900, or 111%.
Investors who bought MSFT straight out would only be looking at a 44% gain.
However, there are some cons. For this LEAP to break even, we’d need MSFT to climb to at least $421 by the end of 2025, a 20% gain from current prices. And if MSFT fails to move higher, we could lose some (or all) of the premium we paid to buy our LEAP.
Even so, buying LEAPS is a great way to profit from AI stocks without spending thousands of dollars on stock.
But this NEXT strategy is even better…
…because it allows us to double our money over the next two years with only a moderate move in price.
2) LEAP Call Spread. A call spread is when you simultaneously buy one call option and sell another option across the same stock and time frame. A LEAP call spread is the same thing, but done with LEAPS. The goal of this strategy is to lower cost and risk of the trade while creating a more realistic break even.
Here’s how it works: Using our MSFT example, one could do the following…
MSFT Leap Spread Example (both transactions should be placed at the same time)
Buy the MSFT December 2025 $350 calls for $71 ($7,100 per contract)
AND
Sell the MSFT December 2025 $400 calls for $48 ($4,800 per contract)
Because the $4,800 premium you receive for selling the $400 call offsets the $7,100 you paid to buy the $350 call, your actual cost per contract is only $2,300.
If MSFT goes up to $400 (only 16% above current prices), the spread would be worth $50, or $5,000 per contract. Subtract out the $2,300 we paid to open the spread, and we’re left with $2,700 — a 117% gain on a much smaller move.
With a spread, LEAPS or not, the stock doesn’t need to work as hard to offer at least a 100% return on investment or better.
However, due to the way bull call spreads are structured, our profit would still be capped at $5,000 per contract — even if MSFT goes even higher than $400. And if MSFT falls or fails to trade above $350 when the option expires, we could still lose some (or all) of the premium we paid to buy our LEAP spread. (Although that is still considerably less than we’d lose if we only bought the original LEAP call.
In Conclusion…
As you can see below, each position has its own positives and negatives. With stock comes no expiration dates, but with options, one can increase probabilities, decrease cost and risks, or even both.
Consider the Costs and Risks
100 shares of MSFT at $346 Actual Cost $34,600
1 contract MSFT Dec 2025 $350 call at $71 Actual Cost $7,100
1 spread MSFT Dec 2025 $350/$400 at $23 Actual Cost $2,300
Consider the Breakeven
MSFT Stock $346
MSFT Dec 2025 $350 call $421
MSFT Dec 2025 $350-$400 spread $373
Consider the ROI if MSFT gains 20%
MSFT Stock 20%
MSFT Dec 2025 $350 call Even
MSFT Dec 2025 $350-$400 spread 117%
Personally, I’m not turning my nose up at a 100%-plus gain on a fairly achievable 20% stock move. That’s why the LEAP call spread is how I’ll be trading this AI stock list. But the best strategy for your portfolio will depend on your personal investing goals and risk tolerance.
Using these strategies makes the most sense across a number of AI stocks that you feel comfortable with to diversify risk even further. Whatever you intend on doing, I hope this helps you understand your investing options when it comes to this new breakout industry…
Oh… and I wrote this article myself, no help from ChatGPT!
To your continued success,
Tom Gentile
America’s #1 Pattern Trader
P.S. Speaking of ChatGPT… this well-known AI tool can write your emails, book your vacation, even build a business for you… But is it a good stock picker? I decided to put it to the test. And the results are not what I expected… Click here to watch my full demonstration.
