How LEAPS® Work

LEAPS^® are simply long-term options that expire up to two years and eight months in the future, as opposed to shorter-dated options that expire within one year.

LEAPS^® grant the buyer the right to buy, in the case of a call, or sell, in the case of a put, shares of a stock at a predetermined price on or before a given date. Equity LEAPS^® are American-style options. Therefore, they may be exercised and settled in stock prior to expiration. The expiration date for equity LEAPS^® is typically the third Friday of the expiration month.

Leaps Chart

LEAPS^® are quoted and traded just like any other exchange-listed option. In fact, many of the features of LEAPS^® are the same for shorter-term options:

Number of shares covered by the contract (100)
Exercise and assignment procedures
Trading procedures
Margin and commission costs

LEAPS^® differ from shorter-term options in several ways including availability, pricing, time erosion vs. delta effect and strategies.