LEAPS

LEAPS (Long-Term Equity Anticipation Securities) are options contracts with expiration dates ranging from one to three years in the future. They function identically to standard options but provide extended time for the investment thesis to play out. LEAPS calls are popular as a leveraged stock replacement strategy: buying a deep in-the-money LEAPS call provides similar upside exposure to owning shares but at a fraction of the capital. LEAPS have lower theta decay compared to near-term options because time value erodes slowly when expiration is far away. They are available on many individual stocks and indexes. LEAPS are commonly used in strategies like the "poor man's covered call" (buying a LEAPS call and selling short-term calls against it) and for long-term directional bets with defined risk.