Updated on July 18, 2023
LEAP stands for “Long-term Equity Anticipation Product.” LEAP options are long-term options contracts that are available on certain underlying assets, including stocks, indexes, and exchange-traded funds (ETFs).
Understanding LEAP in detail
LEAP options have an extended expiration period, typically spanning more than one year. Unlike regular options contracts, which usually have expiration dates within a few months, LEAP options provide investors with the opportunity to take longer-term positions or hedge against potential price movements over an extended period.
LEAP options offer several advantages, such as providing investors with more time for their investment thesis to unfold and allowing for increased flexibility in timing and strategy. They provide the potential for significant returns if the underlying asset moves favorably over the longer duration of the contract.
However, it’s important to note that LEAP options may also have higher premiums and can be less liquid compared to shorter-term options. The extended time frame of LEAP options means that they can be more sensitive to factors like changes in volatility and interest rates.