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By Options AI Screener · Last updated 2026-10-12 · 8 min read
LEAPS are options that expire more than a year from now. That is the entire definition — Long-Term Equity Anticipation Securities is a marketing name for an expiry date, not a different instrument. Every rule of pricing, decay, assignment and exercise is the same as it is for a weekly contract.
The long expiry is attractive for an obvious reason and a misleading one. The obvious reason is that it removes the timing problem that kills most directional option trades. The misleading one is that a long expiry feels like safety, when what it actually buys is patience at a price you pay up front.
The most common use of a LEAPS call is as a cheaper way to be long a stock. The structure is one trade: buy a call a year or more out, hold it instead of shares.
Here is the comparison that decides whether it is worth doing. Illustrative numbers, chosen to be round.
A stock trades at $100. An 18-month $100 call costs $18.
| 100 shares | One LEAPS call | |
|---|---|---|
| Capital | $10,000 | $1,800 |
| Break-even at expiry | $100 | $118 |
| Gain if stock reaches $130 | +$3,000 | +$1,200 |
| Loss if stock is flat at $100 | $0 | −$1,800 |
| Loss if stock falls to $80 | −$2,000 | −$1,800 |
Read the second row first. The call costs $18 and the strike is $100, so the shares must reach $118 — up 18% — before the position breaks even. A shareholder breaks even at $100.
That $18 is the extrinsic premium, and it is the real price of the trade. You are not buying exposure to the stock; you are buying exposure to the stock above $118. If the stock does nothing for eighteen months, the shareholder is flat and the call holder has lost everything. That outcome — the stock being fine and the option being worthless — is the one people do not plan for, because it does not feel like being wrong.
Look at the last row too. A 20% decline costs the shareholder $2,000 and the call holder $1,800. The "limited loss" is limited to approximately the whole position.
The fix for most of the above is to buy a strike well below the current price.
A $70 call on that $100 stock might cost $34: $30 of intrinsic value plus $4 of extrinsic. Break-even is $104 rather than $118, so the stock has to rise 4% rather than 18% for the position to be worth what you paid.
The trade-off is explicit:
A delta near 0.80 means the call moves roughly 80 cents for each dollar in the shares, which is the behaviour people usually want when they say "instead of buying the stock". A delta near 0.50 is a different trade with a different purpose, and it is the one that most often disappoints, because it was chosen for its price.
Extrinsic value does not bleed evenly. It decays slowly while expiry is distant and accelerates as it approaches, roughly with the square root of time remaining.
The practical reading of that curve is the opposite of the intuition:
Which suggests a discipline rather than a prediction: a long-dated call is not a position to hold to expiry. The sensible plan is to be out, rolled, or converted into something else before the decay curve steepens — and to decide that at entry, when the decision is cheap, rather than in the last month when it is not.
Holding a long-dated in-the-money call and selling shorter-dated calls against it is sometimes called a poor man's covered call. It uses a fraction of the capital of the share version, which is the appeal.
It also carries a risk the share version does not. A covered call backed by shares can always be settled by delivering stock you own. A short call backed by a long call cannot: if the short leg is breached and assigned, you have to unwind or exercise the long leg to cover it, and that happens at whatever the market is offering at the time.
The rule that keeps it sane: never sell a call for less credit than the extrinsic value you are paying on the long leg over the same period, and never sell a strike below your long strike plus the debit you paid. Break the second rule and the structure can lose money on a move up, which defeats the purpose entirely.
It is worth being blunt about this, because the long dated nature of LEAPS invites a false sense of margin for error.
A long call needs the stock to rise by more than the premium, within the life of the contract. Extra months make that more likely than a 30-day option would, and they do not make it likely. Direction still has to be right, the size of the move still has to clear the premium, and both have to happen before a fixed date.
The structural issue is that a long call is the one common options position with a high break-even and no income. Every premium-selling structure on this site is paid to wait. A long call pays to wait. That difference compounds across a portfolio, and it is why these positions want to be sized as speculation rather than as a core holding, however long the expiry.
The LEAP Call screener shows the premium split into intrinsic and extrinsic, beside delta and the break-even price, so the hurdle is visible rather than implied. The Covered Call screener is the other half if you intend to sell shorter-dated calls against the position.
None of this is advice about a specific position. The number to carry away is the break-even: strike plus premium, and then ask honestly whether you expect the stock to be above it on that date.
Long-Term Equity Anticipation Securities. It is a label for expiry rather than a distinct instrument. A LEAPS call is an ordinary call option that happens to expire more than twelve months from now, and every mechanic of pricing, assignment and exercise is identical to a short-dated one.
They are more forgiving about timing and no safer about direction. More time means a wrong entry has longer to come good and that decay per day is slower at the outset. It does not change the fact that the whole premium can be lost, or that you need a move larger than the premium to profit at all.
It depends on the strike. A deep in-the-money call is mostly intrinsic value with a modest extrinsic component. An at-the-money call eighteen months out can be almost entirely extrinsic, which means the stock has to rise meaningfully before the position is worth more than it cost.
Holding a long-dated in-the-money call and selling shorter-dated calls against it, in place of holding shares and selling calls. It needs far less capital and introduces a risk the share version does not have, because the long call expires. If the short call is breached and assigned, you may have to unwind the long leg rather than simply delivering stock you own.