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 the Saturday following the third Friday of the expiration month, which is typically in January.

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.