Difference between revisions of "LEAPS"

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Equity LEAPS, or Long-term Equity Anticipation Securities [http://www.cboe.com/LearnCenter/Concepts/Beyond/leaps.aspx], a product developed in 1990 by the [[Chicago Board Options Exchange]] ([[CBOE]]) are long-dated [[put]] and [[call]] [[option]]s on common stock or [[ADR]]s.  
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LEAPS, or Long-term Equity Anticipation Securities [http://www.cboe.com/LearnCenter/Concepts/Beyond/leaps.aspx], a product developed in 1990 by the [[Chicago Board Options Exchange]] ([[CBOE]]), are long-dated [[put]] and [[call]] [[option]]s on common stock or [[ADR]]s. LEAPS are available on individual equities and on equity indexes at CBOE.
  
  
These long-term options provide the [[holder]] the right to purchase, in the case of a call, or sell, in the case of a put, a specified number of stock shares at a pre-determined price up to the expiration date of the option, ''which can be three years in the future''. This is distinction between LEAPS and more traditional security options -- the long-dated nature of LEAPS. LEAPS contracts expire in January of their expiration year.
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These long-term options provide the [[holder]] the right to purchase, in the case of a call, or sell, in the case of a put, a specified number of stock shares (or an equity index) at a pre-determined price up to the expiration date of the option, ''which can be three years in the future''. This is distinction between LEAPS and more traditional security options -- the long-dated nature of LEAPS. LEAPS allow investors to buy and hold a market position for an extended period of time. Investors do not need to predict precise timing of the market movements to profit — instead, they need to correctly predict market trends over time. LEAPS contracts expire in January of their expiration year.
  
  
Like regular equity options, the owner (or holder) of an Equity LEAPS call has the right to purchase, or sell in the case of a put, a pre-determined amount of stock (the standarized contract size), at a pre-determined price, called the [[strike price]], for a specified period of time. For Equity LEAPS, the specified period of time, or duration of this option, can be up to 3 years into the future, as stated above.  
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Like regular equity options, the owner (or holder) of an Equity LEAPS call has the right to purchase, or sell in the case of a put, a pre-determined amount of stock (the standarized contract size), at a pre-determined price, called the [[strike price]], for a specified period of time.  
  
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LEAPS calls give investors with a medium- to long-term investment view with the ability to participate in the upward movement of a stock ''without making an outright stock purchase''. LEAPS puts, on the other hand, can provide a medium to long-term insurance or hedge for stock owners in the event of a substantial decline in their stocks.
  
LEAPS calls can provide an investor with a medium- to long-term investment view with the ability to participate in the upward movement of a stock ''without making an outright stock purchase''. LEAPS puts, on the other hand, can provide a medium to long-term insurance or hedge for stock owners in the event of a substantial decline in their stocks.
 
  
 
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Like other equity options, transacting LEAPS must be done through a [[broker-dealer]] ([[B-D]]) or through an online trading network affiliated with a B-D.  LEAPS are traded on CBOE from 8:30 a.m. to 3:00 p.m. (Chicago time).
Like other equity options, transacting Equity LEAPS must be done with a [[broker-dealer]] ([[B-D]]) or through an online trading network affiliated with a B-D.  LEAPS are traded on CBOE from 8:30 a.m. to 3:00 p.m. (Chicago time).
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Revision as of 08:15, 19 September 2007

LEAPS, or Long-term Equity Anticipation Securities [1], a product developed in 1990 by the Chicago Board Options Exchange (CBOE), are long-dated put and call options on common stock or ADRs. LEAPS are available on individual equities and on equity indexes at CBOE.


These long-term options provide the holder the right to purchase, in the case of a call, or sell, in the case of a put, a specified number of stock shares (or an equity index) at a pre-determined price up to the expiration date of the option, which can be three years in the future. This is distinction between LEAPS and more traditional security options -- the long-dated nature of LEAPS. LEAPS allow investors to buy and hold a market position for an extended period of time. Investors do not need to predict precise timing of the market movements to profit — instead, they need to correctly predict market trends over time. LEAPS contracts expire in January of their expiration year.


Like regular equity options, the owner (or holder) of an Equity LEAPS call has the right to purchase, or sell in the case of a put, a pre-determined amount of stock (the standarized contract size), at a pre-determined price, called the strike price, for a specified period of time.

LEAPS calls give investors with a medium- to long-term investment view with the ability to participate in the upward movement of a stock without making an outright stock purchase. LEAPS puts, on the other hand, can provide a medium to long-term insurance or hedge for stock owners in the event of a substantial decline in their stocks.


Like other equity options, transacting LEAPS must be done through a broker-dealer (B-D) or through an online trading network affiliated with a B-D. LEAPS are traded on CBOE from 8:30 a.m. to 3:00 p.m. (Chicago time).