What is a leap option?

Description of LEAP Options A LEAPoption is essentially an option with longer terms than standard options. The acronym “LEAP” stands for Long Term Equity Anticipation Security and like standard options, LEAPS come in two forms: calls and puts. These long-dated options are available on approximately 2500 securities and several indexes.

Is a leap option too short for a buy and hold investor?

And even LEAP options with expirations over a year may be too short for the most ardent buy and hold investor. However, a LEAP option can be replaced by another LEAP with a later expiry. For example, a two-year LEAP call could be held for a single year and then sold and replaced by another two-year option.

What are leaves options?

LEAPS are a type of options whose expiry date is more than a year. The main benefit of a LEAPS option is that a long term investor can dabble in options without worrying about the short term volatility of the market. It also helps investors invest less capital when compared to owning the actual stock.

Are leap call options a source of investment debt?

The Bottom Line Most buy-and-hold investors and index investors are not aware that LEAP calls can be used as a source of investment debt. Using LEAP call options is more complex than purchasing stock on margin, but the rewards can be a lower cost of capital, higher leverage and no risk of margin calls .