What Are LEAPS Options?

What are LEAPS Options?

Bywww.Options-Trading-Education.com

An options trader may wish to trade with a longer timeline than with regular options

contracts.

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In this case he or she may choose LEAPS

options. What are LEAPS options?

LEAPS is an acronym.

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A Long Term Equity AnticiPation Security

is an option with longer term until

expiration than other options.

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There are LEAPS available for well over two thousand equities

as well as nearly two dozen indexes.

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What are LEAPS Options for Traders?

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LEAPS are way to buy or sell puts or calls on

contracts that commonly run for up

to three years.

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This is as opposed to the three, six, and nine month

terms for commonly traded options. What are

LEAPS options for investors?

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They are a means of hedging risk through

online options trading.

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As an example, an investor may purchase

shares of a rapidly rising stock and also

buys puts on the stock.

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This way he guards against an unexpected

correction of the stock.

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If the stock falls in price he executes the

put option and sells his stock at the

contract or strike price,

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even though the market price may have

fallen significantly.

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Buying LEAPS Options

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The Chicago Board Options Exchange,

part of the CME group, offers a wide range of

LEAPS options contracts.

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What are LEAPS options via CBOE for

investors?

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Buying LEAPS calls with three year

expirations is similar to buying stocks.

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The long term of a LEAPS contract,

allows for the trader to profit from steady

growth and prosperity of a company,

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and not have to try anticipating a short

term move in the stock price.

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As mentioned above investors also

use puts to preserve stock gains

using LEAPS contracts.

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This provides insurance against a

fall in price of the stock.

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It should be noted that traders pay for the

increased time value of a LEAPS options

contract.

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They cost more than regular options

contracts.

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Selling LEAPS Options

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What are LEAPS options for options

writers?

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As with all options trading, sells typically

outperform options buyers over the long

term.

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Options writers of LEAPS demand a

higher price for selling puts and calls on

LEAPS because of the time until expiration.

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Three years is a long time in the world of

optionswww.Options-Trading-Education.com

and this can spell good profits for

options writers and it can spell the

occasional disaster.

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As will all options, the bulk of options writing

is done by large trading houses

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and others with deep pockets because of

the risk of an occasional substantial

loss.

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Trading Stock Indexes with LEAPS

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Many traders and investors choose to

trade LEAPS options on index traded funds.

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This approach has to do with investing in or

betting against the overall economy and

market.

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As will nearly all options trading one

does not need to hold the LEAPS contract to

expiration.

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Traders will exit their position by executing the opposite trade in

order to secure profits or reduces losses.

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So, what are LEAPS options

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They are a longer than usual options contract that provides a longer time span for making profits in both stocks

and stock indexes.

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The options trading strategies

that one uses will depend on the stock or index in questionwww.Options-Trading-Education.com

and a combination of fundamental and technical factors.

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For more insights and useful information about

options and options trading, visit

www.Options-Trading-Education.com

.www.Options-Trading-Education.com