Several factors impact the availability of LEAPS®. When options are listed for trading on a particular stock, most times LEAPS® are not immediately available. After a period of time, and if interest warrants it, the exchanges listing the shorter-term options may decide to list LEAPS® options, after consulting with the market-makers or specialists assigned to trade the stock options. The reason for this is that LEAPS® options are difficult to price because of their long life. The exchanges ensure that sufficient interest is present in the market, and that market-makers or specialists are prepared to price and trade longer-dated options once they are listed. The result is that LEAPS® are not available on every stock which has options traded on it. LEAPS® are initially listed with three strike prices, at the current price and 20 to 25% above and below the price of the underlying stock. Strikes may be added as the underlying stock moves. LEAPS® only have one expiration month: January in two different years.
As LEAPS® draw within one year of their expiration and it becomes necessary to list new LEAPS® series, the existing LEAPS® options continue to be listed and traded until their expiration. However, because of the shorter length of time until expiration, they then trade as ordinary shorter-term options and they lose their distinctive LEAPS® symbols. New LEAPS® options with expiration dates in the future are then added.
In order to determine if LEAPS® are available on a stock that interests you, consult our Directory of Listed Options (xls format). LEAPS® account for approximately 10% of all options listed. LEAPS® are proving themselves very attractive to an ever-increasing number of options investors and traders.
© 2017 The Options Industry Council. All Rights Reserved. Visit us online at www.optionseducation.org
How to Win Directional Trades with a Top-Down ApproachThursday, Dec 14, 2017 4:15PM EST REGISTER