LEAPS — Long-term Equity AnticiPation Securities — are simply options that expire far in the future, typically one to three years out. Their long horizon makes them behave very differently from the weeklies and monthlies most traders use.
Open the calculator →A deep in-the-money LEAPS call acts like owning the stock for a fraction of the capital: it has a high delta and only slowly loses time value, so it tracks the shares closely.
They are the long leg of a poor man’s covered call and let you express a long-term bullish thesis with less money tied up than buying shares outright.
You still pay time value and you earn no dividends, so a LEAPS underperforms the dividend-adjusted stock if the price goes nowhere.
A long holding period also means more exposure to changes in implied volatility — a big drop in IV can hurt a long LEAPS noticeably.
Choose a high delta (0.80+) so the LEAPS behaves like the stock with limited extrinsic value to decay, and check the bid/ask spread because long-dated options can be less liquid.
Because so much capital can sit in a single LEAPS, size the position as you would the equivalent shares, not as a cheap lottery ticket.
Only in time to expiration — they can run one to three years, which means slower time decay and greater sensitivity to volatility.
A deep-ITM LEAPS used as a conservative stock substitute can be reasonable, but the large capital per contract means position sizing matters.
No — as options they pay no dividends, which is one reason a deep-ITM call still costs less than the shares.
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