Long-term Equity AnticiPation Securities (LEAPS) at CBOE

Long-term Equity AnticiPation Securities (LEAPS) are long-term option contracts that allow investors to establish positions that can be maintained for a period of up to three years. CBOE lists LEAPS on Equity and Index products.

The development and introduction of LEAPS by CBOE in 1990 added a whole new range of options possibilities, many suited for conservative stock investors. Current options investors are using LEAPS, as are stock investors, because of the similarities between LEAPS and shares of stock, and the more conservative nature afforded to LEAPS by their long-term expirations.

Benefits of Equity and Index LEAPS:

Equity LEAPS Benefits:

• Equity LEAPS calls can provide long-term stock market investors an opportunity to benefit from the growth of large capitalization companies without having to make outright stock purchases
• Equity LEAPS puts can provide a hedge for stock investors against substantial declines in underlying equities
• Current equity options users may also find LEAPS appealing if they desire to take a longer term position of up to three years in some of the same options they currently trade

Index LEAPS Benefits

• Index LEAPS let you trade, hedge or invest in the "entire" stock market or select industry sectors for a time that can be measured in years
• Index options let you take a bullish or bearish position on the entire market
• Index options let you hedge your investments against adverse market moves
• Index LEAPS let you do all this over a longer time period

LEAPS Resources:

Equity LEAPS Strategy Discussions:

Weekly LEAPS Strategy Archive:

Index LEAPS Strategy Discussions:

Ask the Institute LEAPS Q&A:

• What if I buy stock and then write a covered call LEAPS option, for example out to 2003, and the company is the target of a takeover bid for cash?
• Will the Stock Repair Strategy work as well with LEAPS as with short-term options, since that would lower my commissions?
• How would you determine the most appropriate strike price for a stock that you wish to purchase an option or LEAPS for?
• If you buy a LEAPS option, can the value increase and actually become profitable before the price of the underlying stock reaches the strike price?
• If a LEAPS option expires, is the owner obligated to purchase the stock?:
• How do you get the theoretical value of an option that expires in 3 or 4 years?
• Why would I want to be long stocks when I could be long LEAPS? What are the disadvantages to owning LEAPS as opposed to the underlying stock?
• If I own a LEAPS option, and I sell a call against it, if the stock is above my strike price, will my option be exercised?
• I am considering the following strategy: buying a LEAPS put and selling the same strike or different for 1 -3 months.
• I want to hedge a $100,000 portfolio by buying puts on the OEX. How do I calculate how many puts I need to buy?
• Why are there two different LEAPS for a stock with the same expiration and strike?
• What is the tax treatment for LEAPS held for 18 months?
• What are LEAPS? Do they affect the price of the stock? Does it set the price of options?
• Is it true that by their nature options are short-term instruments and forecasting short-term price movements is nearly impossible?
• Are LEAPS available only on specific equity securities, or can you buy leaps on indices. Where do I find prices on LEAPS?
• Can I sell calls on stocks in my IRA?
• Click here for the complete Ask the Institute Q&A Archive.