Derivatives
What is LEAPS (Long-Term Equity Anticipation Securities)?
LEAPS are exchange-traded options with expirations longer than one year (up to ~3 years out), used for long-term directional bets, stock replacement strategies, and tax-aware hedging in US markets.
Formula
Same Black-Scholes framework as standard options, just with longer time-to-expiry → much higher Vega (IV sensitivity) and much lower Theta (per-day time decay).
How to Interpret
Buying deep-in-the-money LEAPS calls (Delta 0.80+) functions as a leveraged stock replacement (~3–5x effective leverage with a defined max loss). Holding LEAPS over 12 months can qualify gains for long-term capital gains rates. Indian equity options typically expire within ~3 months - LEAPS-style ultra-long-dated options are essentially a US-only product.
Typical Ranges
Liquid LEAPS exist on most large-cap US stocks and major ETFs (SPY, QQQ, IWM, AAPL, MSFT, NVDA). Aim for >100 open interest at your strike for tight spreads.