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McMillan Analysis Corp - Understanding Leaps

December 2020

posted by Volatility Capture Equity
4yrs ago 205

McMillan Asset Management - Understanding Leaps


This article was originally published in The Option Strategist Newsletter Volume 1, No. 4 on February 13, 1992. 


LEAPS is an acronym for Long-term Equity AnticiPation Securities. This is a wordy name for "long-term option". A LEAPS (or is it a LEAP?) is nothing more than a listed call or put option that is issued with two or more years of time remaining. It is therefore a longer-term option than one is used to dealing with. Other than that, there is no material difference between LEAPS and other calls and puts. Strategies involving long-term options are not substantially different from those involving shorter-term options. However, the fact that the option has so much time remaining seems to favor the buyer and be a detriment to the seller. This is one reason why LEAPS have been popular.


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ALL ALPHAMAVEN CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. CONTENT POSTED BY MEMBERS DOES NOT NECESSARILY REFLECT THE OPINION OR BELIEFS OF ALPHAMAVEN AND HAS NOT ALWAYS BEEN INDEPENDENTLY VERIFIED BY ALPHAMAVEN. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THIS IS NOT A SOLICITATION FOR INVESTMENT. THE MATERIAL PROVIDED HEREIN IS FOR INFORMATIONAL PURPOSES ONLY. IT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY INTERESTS OF ANY FUND OR ANY OTHER SECURITIES. ANY SUCH OFFERINGS CAN BE MADE ONLY IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH IN THE INVESTMENT'S PRIVATE PLACEMENT MEMORANDUM. PRIOR TO INVESTING, INVESTORS ARE STRONGLY URGED TO REVIEW CAREFULLY THE PRIVATE PLACEMENT MEMORANDUM (INCLUDING THE RISK FACTORS DESCRIBED THEREIN), THE LIMITED PARTNERSHIP AGREEMENT AND THE SUBSCRIPTION DOCUMENTS, TO ASK SUCH QUESTIONS OF THE INVESTMENT MANAGER AS THEY DEEM APPROPRIATE, AND TO DISCUSS ANY PROSPECTIVE INVESTMENT IN THE FUND WITH THEIR LEGAL AND TAX ADVISERS IN ORDER TO MAKE AN INDEPENDENT DETERMINATION OF THE SUITABILITY AND CONSEQUENCES OF AN INVESTMENT.