How LEAPS® Work (Part 2)

Table of Contents

1. LEAPS® - Part 1
2. LEAPS® - Part 2
3. LEAPS® - Part 3
4. LEAPS® - Part 4
5. LEAPS® - Part 5
6. LEAPS® - Part 6
7. LEAPS® - Part 7
8. LEAPS® - Part 8

LEAPS® are simply long-term options that expire at dates up to 2 years and 8 months in the future, as opposed to shorter-dated options that expire within one year.

LEAPS® grant the buyer the right to buy, in the case of a call, or sell, in the case of a put, shares of a stock at a predetermined price on or before a given date. Equity LEAPS® are American-style options, and therefore may be exercised and settled in stock prior to the expiration date. The expiration date for Equity LEAPS® is the Saturday following the third Friday of the expiration month.

LEAPS® are quoted and traded just like any other exchange listed option. In fact, many of the features of LEAPS® are the same for shorter-term options:

• Number of shares covered by the contract (100)
• Exercise and assignment procedures
• Trading procedures
• Margin and commission costs

However, LEAPS® differ from shorter-term options in several ways including availability, pricing, time erosion vs. delta effect, symbols and strategies.

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Important: Options involve risk and are not suitable for all investors. Before investing in options, please read the Characteristics and Risks of Standardized Options.