I keep hearing about leap options but I really do not understand what they are. I have been trading regular options for a while but have not tried these.
I looked online for information but it is all too complicated. I just want to know the basics and if they are worth learning.
LEAP stands for Long-term Equity Anticipation Securities. They expire from 9 months to 3 years. Higher initial cost with reduced time decay compared to standard options.
LEAPs are really just longer-term options that let you hold positions for months or even years. Unlike regular options that can expire in a few weeks, LEAPs give you extra time to see if the stock moves as you expect. You will pay a higher premium for this time, but it can save you from the quick losses that come with time decay. They’re useful if you believe in a stock’s future but can’t pinpoint the timing.
Back when I was learning options, I bought my first LEAP thinking it was just a regular call option.
Turns out LEAPs expire way further out than normal options. Mine had 18 months left when I bought it instead of the usual 30-60 days I was used to.
The extra time cost me more upfront but saved me from getting crushed by time decay like I did with shorter options.
LEAP options are long-term options that expire in up to three years, unlike regular options that expire in weeks or months.
Having more time can lead to higher premiums, but it also grants more opportunities for favorable stock movements.
These are suitable for those who prefer holding positions longer without the worry of short-term expirations.
LEAP options are just standard options that last much longer, up to three years.