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.