LEAPS are simply options with more than a year to expiration. Nothing about the contract is different — same multiplier, same mechanics, same settlement.

What changes is the behaviour. Every greek you have learned reweights when the time axis stretches from thirty days to two years, and several conclusions from earlier lessons quietly reverse.

Every greek, reweighted

The first two rows are the important ones and they reverse the usual picture. A short-dated option is primarily a time instrument. A LEAPS is primarily a volatility instrument that happens to have an expiration attached.

Why you should not sell LEAPS for income

The arithmetic looks appealing at first glance. Sell a two-year put and the premium is several times what a monthly pays, and the number is large.

Annualise it and the appeal collapses. A two-year contract paying four times a monthly's premium is paying you a sixth as much per unit of time, and it locks up your collateral for twenty-four months to do it. Every one of those months, the capital cannot be redeployed into a trade with better decay characteristics.

Add to that: you carry two years of volatility exposure, two years of headline risk, and two years of the company being able to change. For a premium seller optimising for return per dollar-day of capital, LEAPS are close to the worst available choice.

Choosing one as a long leg

Delta above 0.80. Deep enough to behave like the stock. Below that you are buying a directional bet rather than a share substitute.

Minimal extrinsic value. This is what you will pay for and what will decay. The deeper in the money, the less of it there is.

Real liquidity. LEAPS chains are considerably thinner than front-month ones, and a wide spread on a $10,000 position is expensive in absolute terms even at a modest percentage.

Low implied volatility, if you can. You are net long vega for a long time. Buying long-dated options when IV rank is elevated means paying for volatility you then watch deflate.

The one place rho earns attention

As the widget shows, a percentage point of rate movement is worth cents on a monthly and dollars on a two-year contract. Long calls have positive rho, so falling rates reduce their value.

For anyone holding LEAPS calls as stock substitutes, that is a real exposure — small relative to delta, but no longer the rounding error it is everywhere else in premium selling.

A tax note

LEAPS are the one options position where long-term capital gains treatment is actually reachable, because you can hold one for more than a year.

That is a genuine advantage over the short-dated positions that make up the rest of this course — and it applies to the buyer, which is another reason LEAPS belong on the long side of your book rather than the short side.

What can go wrong

Selling them for the large premium. Poor per-day return and a two-year capital lock.

Buying them in high IV. Long vega for a long time is the wrong side of an expensive volatility environment.

Choosing a delta that is too low. Below 0.80 it is a directional bet, not a share substitute.

Ignoring the spread. A modest percentage of a large position is still a lot of money.