LEAPS

LEAPS (Long-term Equity Anticipation Securities) are simply options with expiration dates more than a year out — they work exactly like any other option, just with more time. Because time decay accelerates as expiration nears, a LEAPS contract many months or years out sits in the slow, early part of that curve, and a deep in-the-money LEAPS call moves nearly dollar-for-dollar with the stock, much like owning it outright. That stock-like behavior at a fraction of the capital is what makes LEAPS the backbone of the poor man's covered call. LEAPS still expire and still lose time value, especially as their own expiration eventually approaches.