What are leaps?

[spadmin]

Long-term Equity Anticipation Products (LEAPS) are options that don't expire for at least 9 months and can have expiration 2 or 3 years out. Once an option's expiration gets closer than 9 months, they become plain options again with an entirely new ticker symbol. Be this as it may, LEAPS are in every way an option. Their expirations are a long way off and that makes them prime candidates for long-term plays and secure bets for shorter-term trades.
For traders with a traditional buy and hold orientation, options usually carry with them the stigma of being short-term trading tools with tax consequences. LEAPS, by the very nature of their long-term expiration dates, help to overcome this stigma. It isn't unusual for LEAPS traders to hold a position for more than a year. Plus, LEAPS have the added benefit of giving a trader significantly more time to be right about a market move.

Article via http://www.optionetics.com

[sreeja]

LEAPs can be priced using Black-Scholes pricing models and can be traded using the same strategies as more traditional options. Investors can purchase put LEAPs to protect long term stock positions or purchase call LEAPs if they expect a long-term bull market. Spreads, the simultaneous buying and selling of options at different strike prices, can also be implemented with LEAPs, as can strategies designed to profit from changes in market volatility.