LEAPS(R) (Long-term Equity AnticiPation Securities) may allow you to benefit from the long-term appreciation of an underlying stock without committing the capital that would otherwise be necessary when buying the stock. LEAPS offer a longer-term right to buy a stock at a specified price, and therefore can be an alternative to purchasing or selling an option in the short term. Many investors utilize these products because they typically offer additional time for a position/strategy to work.
There are factors investors should consider when deciding if LEAPS are right for their portfolio. LEAPS do not pay dividends, the margin associated with LEAPS is considerably smaller than that of stock, and, as with any investment, there is an up front premium required that may not be recovered.
If you decide LEAPS may be a good fit for your portfolio, be sure to visit our Option Pricer tool. Here, you can plug in various options scenarios--including volatility, price, time, dividend and interest rate-- to forecast future LEAPS prices.
See for yourself if LEAPS is a fit for you. Visit our LEAPS FAQs and Option Pricer tool. Want learn more about how the Option Pricer works? Check out our webinar on how to use the Option Pricer.
Mike Tosaw
Director of Education, optionsXpress
LEAPS(R) is a registered trademark of the CBOE.
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