LEAPS
Long-term Equity AnticiPation Securities — listed options with expirations longer than one year. Used for longer-horizon directional bets or low-cost covered-call strategies.
LEAPS (Long-term Equity AnticiPation Securities) are standard listed options with expiration dates extending more than one year into the future. They are available on most large-cap stocks and major index ETFs.
Buyers use LEAPS to take leveraged directional positions over a multi-month or multi-year horizon without the rapid theta decay of short-dated options. A LEAPS call can substitute for a stock position at a fraction of the capital, preserving the upside while capping risk at the premium.
LEAPS are also used in poor man's covered call strategies: buy a deep ITM LEAPS call (as a stock substitute) and sell short-dated OTM calls against it repeatedly to reduce the cost basis over time.
Example
Instead of buying 100 shares of MSFT at $420 ($42,000), you buy a LEAPS $380 call expiring 18 months out for $7,200. You control 100 shares with defined risk. If MSFT reaches $500, your call is worth ~$12,000+ — a 67% gain vs. a 19% gain on the stock.
Related Terms
Call Option
An options contract giving the buyer the right to purchase the underlying asset at the strike price before or on expiration.
BeginnerCovered Call
An options strategy where the holder of a long stock position sells a call option against it, generating income at the cost of capping upside.
IntermediateDelta
The rate of change in an option's price for a $1 move in the underlying. Ranges from 0 to 1 for calls and −1 to 0 for puts.
IntermediateTime Value
The portion of an option's premium beyond its intrinsic value, reflecting the probability that the option moves further in the money before expiry.
IntermediateVega
The sensitivity of an option's price to a 1-percentage-point change in implied volatility.
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