Low Exercise Price Option - LEPO


DEFINITION of 'Low Exercise Price Option - LEPO'

A call option with an exercise price of 1 cent, and an agreement to purchase 1000 shares. They cannot be exercised until expiry, work similar to that of a futures contract, and the premium paid is basically the price to purchase an entire share however, the purchaser only posts a percentage as margin.

BREAKING DOWN 'Low Exercise Price Option - LEPO'

Low exercise price options were started in Switzerland and quickly taken up in Finland for one main reasons. That was to avoid paying the required stamp duties that are sometimes charges on stock trading. Since the strike price is so close to zero, the investor purchasing the lepo gains most of the feautres of owning the share directly except dividends and voting rights.

  1. Option

    A financial derivative that represents a contract sold by one ...
  2. Premium

    1. The total cost of an option. 2. The difference between the ...
  3. Exercise

    To put into effect the right specified in a contract. In options ...
  4. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
  5. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  6. Risk

    The chance that an investment's actual return will be different ...
Related Articles
  1. Investing Basics

    Pin Down Stock Price With Real Options

    How can you assign a value to what a company may do with its business in the future? We explain how it works.
  2. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  3. Options & Futures

    Dividends, Interest Rates And Their Effect On Stock Options

    Learn how analyzing these variables are crucial to knowing when to exercise early.
  4. Options & Futures

    How Does Your Margin Grow?

    Risk-management tool SPAN margin boosts profitability prospects by helping to determine when to exit a trade.
  5. Options & Futures

    Options On Futures: A World Of Potential Profit

    There's one simple hurdle in the transition from stock to futures options: learning about product specifications.
  6. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  7. Options & Futures

    20 Investments You Should Know

    To take advantage of all your investing options, you need to know what your choices are. Here we tell you about the diverse features and advantages of 20 different financial instruments.
  8. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  9. Investing

    Oil: Why Not to Put Faith in Forecasts

    West Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
  10. Options & Futures

    Pick 401(k) Assets Like A Pro

    Professionals choose the options available to you in your plan, making your decisions easier.
  1. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  2. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  3. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  4. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  5. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  6. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!