This list represents some of the most frequently asked questions relating to the Chicago Board Options Exchange and options trading in general.
LEAPS® Questions
What are Equity LEAPS?
Equity LEAPS, or Long-term Equity Anticipation Securities are long-dated put
and call options on common stock or ADRs. These long-term options provide the
holder the right to purchase, in the case of a call, or sell, in the case of a
put, a specified number of stock shares at a pre-determined price up to the
expiration date of the option, which can be three years in the future.
What determines if LEAPS are available on a particular stock?
LEAPS trade on a select list of optionable stocks. The Chicago
Board Options Exchange regularly reviews its options products and periodically
lists new Equity LEAPS. An updated CBOE LEAPS list can be obtained by visiting
the Symbol Directory located
within this site.
When do LEAPS expire? When can LEAPS be exercised?
As with equity options, the expiration date is the Saturday following the third
Friday of the expiration month. All equity LEAPS contracts expire in the month
of January. Equity options and Equity LEAPS are subject to "American style"
exercise. This means the holder has the right to exercise the options on any
business day prior to expiration.
How do I know when the next January expiring LEAPS will be listed?
All new January expiring equity LEAPS are initially listed shortly following
the expiration in either May, June, or July each year. The month that the LEAP
is initially listed in is dependent upon the quarterly cycle of the option.
Cycle 1 options January expiring LEAPS are listed after the expiration in May,
cycle 2 after the expiration in June, and cycle 3 after the expiration in July.
What can Equity LEAPS do for me?
As with regular equity options, the owner (or holder) of an Equity LEAPS call
has the right to purchase, or sell in the case of a put, a pre-determined
amount of stock, known as the contract size, at a pre-determined price, called
the strike price, for a specified period of time. For Equity LEAPS, the
specified period of time, or duration of this option, can be up to 3 years into
the future. LEAPS calls can provide an investor with a medium to long-term
investment view the opportunity to participate in the upward movement of a
stock without making an outright stock purchase. LEAPS puts can provide a
medium to long-term insurance or hedge for stock owners in the event of a
substantial decline in their stocks.
If an exchange offers LEAPS on an equity option, how would I
distinguish between a regular January option and a January LEAP?
Just as a standard option has its' own unique option symbols, equity LEAPS also
have unique "root" symbols that allow investors to distinguish
between the variety of options currently available on a particular stock. An
example would be:
IBM (Standard Option expires January 2005): IBM January 80 Call
IBM (LEAPS Option expires January 2006): LIB January 80 Call
IBM (LEAPS Option expires January 2007): ZIB January 80 Call
LEAPS symbols are listed in the Symbol
Directory.
Can I purchase LEAPS directly from the Chicago Board Options
Exchange?
No. LEAPS must be purchased like all other option securities, via a broker
dealer or online trading network.
What are the trading hours for Equity LEAPS Options?
As with regular equity options, the trading hours for Equity LEAPS are from
8:30 a.m. to 3:00 p.m. Central Time (Chicago time).
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Options involve risk and are not suitable for all
investors. Prior to buying or selling an option, a person must receive a copy
of Characteristics and Risks of Standardized
Options (ODD). Copies of the ODD are available from your broker, by
calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North
Wacker Drive, Suite 500, Chicago, Illinois 60606. The information on this
website is provided solely for general education and information purposes and
therefore should not be considered complete, precise, or current. Many of the
matters discussed are subject to detailed rules, regulations, and statutory
provisions which should be referred to for additional detail and are subject to
changes that may not be reflected in the website information. No statement
within the website should be construed as a recommendation to buy or sell a
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