Long-Term Equity AnticiPation Securities (LEAPS)
Chapters in this video
- 0:00 Meet Carla and the three-year LEAPS timeline
- 1:41 LEAPS vs standard options: OCC, 100 shares, American-style
- 3:09 Why more time value means a higher premium
- 4:34 Final-year conversion to a standard option
- 5:03 Dividends, voting rights, and the third-Friday-in-January trap
- 6:21 Rapid-fire exam recap
What this video covers
- What Long-Term Equity AnticiPation Securities (LEAPS) are, and the up-to-three-year expiration window that sets them apart from standard short-term options
- Why one LEAPS contract still equals 100 shares, is still cleared by the Options Clearing Corporation (OCC), and is still American-style for equity LEAPS
- The single date trap: LEAPS expire on the third Friday in January of the expiration year, never any other month
- Why LEAPS carry a higher premium (more time value), and why higher premium is expected math, not a disadvantage
- How a LEAPS contract converts into a standard short-term option once it enters its final year
- The big gotcha that LEAPS holders get zero dividends and zero voting rights until they actually exercise the option
- Common LEAPS strategies: long-term speculation, protective puts for portfolio hedging, and the stock substitute strategy using LEAPS calls
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