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Finance Dictionary and Glossary of Investment Terms
LEAPS
Definition 1.
See: Long-Term Anticipation Securities
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Definition 2.
Long-Term Equity Anticipation Securities. Long-term stock options or index options, with expiration dates up to three years away. LEAPs are very similar to standard options except for the fact that they expire much further in the future. They can be safer than traditional options because it is somewhat easier to predict stock movement over longer periods. Like options, they allow an investor to lock in a fixed price for the underlying security. Therefore, like options, they can be effective for both leverage and insurance purposes. Expiration generally occurs 36 months after purchase, and LEAPs are American style, so they can be exercised at any time before expiration. Strike prices usually range around 25% above or below the price of the underlying stock when the LEAP is first offered.
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Definition 3.
An acronym for Long-term Equity AnticiPation Securities. LEAPS are put or call options with expiration dates set as far as two and one-half years in the future. Like standard options, each LEAPS contract represents 100 shares of the underlying stock. LEAPS calls can provide an investor the opportunity to participate in the upward movement of a stock without making an outright stock purchase. LEAPS puts can provide medium to long-term insurance or hedge for stockowners in the event of a substantial decline in their stocks.
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