Long-Term Equity Anticipation Securities - LEAPS

AAA

DEFINITION of 'Long-Term Equity Anticipation Securities - LEAPS'

Publicly traded options contracts with expiration dates that are longer than one year. Structurally, LEAPS are no different than short-term options, but the later expiration dates offer the opportunity for long-term investors to gain exposure to prolonged price changes without needing to use a combination of shorter-term option contracts. The premiums for LEAPs are higher than for standard options in the same stock because the increased expiration date gives the underlying asset more time to make a substantial move and for the investor to make a healthy profit.

INVESTOPEDIA EXPLAINS 'Long-Term Equity Anticipation Securities - LEAPS'

LEAPS are an excellent way for a longer-term trader to gain exposure to a prolonged trend in a given security without having to roll several short-term contracts together. The ability to buy a call/put option that expires one or two years in the future is very alluring because it gives the holder exposure to the long-term price movement without the need to invest the larger amount of capital that would be required to own the underlying asset outright. These long-term options can be purchased not only for individual stocks, but also for equity indexes (such as the S&P 500).

RELATED TERMS
  1. Call

    1. The period of time between the opening and closing of some ...
  2. Option

    A financial derivative that represents a contract sold by one ...
  3. Chicago Board Options Exchange ...

    Founded in 1973, the CBOE is an exchange that focuses on options ...
  4. Options Contract

    A contract that allows the holder to buy or sell an underlying ...
  5. Option Class

    The set of all the call options or all the put options for a ...
  6. Put

    An option contract giving the owner the right, but not the obligation, ...
Related Articles
  1. Options & Futures

    Using LEAPS With Collars

    This options strategy will help you lock in profit while keeping your upside potential.
  2. Investing Basics

    Covered Call Strategies For A Falling Market

    Find out how to come out on top, even when the market is dropping.
  3. Options & Futures

    Leveraged Investment Showdown

    Margin loans, futures and ETF options can all mean better returns, but which one should you pick?
  4. Options & Futures

    Rolling LEAP Options

    The rewards of using LEAP call options can be a lower cost of capital, higher leverage and no risk of margin calls.
  5. Options & Futures

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  6. Options & Futures

    Going Long On Calls

    Learn how to buy calls and then sell or exercise them to earn a profit.
  7. Options & Futures

    Long-Term Equity Anticipation Securities: When To Take The "LEAP"?

    Options are always speculative, but LEAPS provide a longer time frame, which may make them more profitable.
  8. Options & Futures

    Using LEAPS In A Covered Call Write

    Discover how strategy can help reduce your downside risk.
  9. Options & Futures

    Trading The Gold-Silver Ratio

    This method may seem arcane, but many well-established strategies rely on it.
  10. Options & Futures

    A Detailed Look Into China's Options Market

    As the Chinese options market gradually takes shape, we provide an overview, including details of the initial phase and building blocks, primary beneficiaries, the impact on the overall financial ...

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center