Strategy Guide
LEAPS Guide
Last updated: September 2026
Long-dated deep in-the-money calls as stock replacement: selection rules, what they cost, and the ways they fail.
The core idea
A LEAPS call is a call option with a year or more to expiration. A deep in-the-money LEAPS call, delta 0.70 or higher, moves almost dollar-for-dollar with the underlying while costing a fraction of the share price.
Compared to owning shares, the trade has a defined maximum loss (the premium paid), requires far less capital, and carries no margin call. The trade-off: time decay, and no dividends.
Selection rules
Three rules do most of the work. Delta at 0.70 or above so the option tracks the stock. Expiry 12 months or more out so decay stays slow and a bad stretch is survivable. Liquidity high enough that entering and exiting does not surrender the edge to the spread.
Entries only happen when the full signal gate agrees: momentum, trend, volatility, regime, and model confidence.
How LEAPS lose money
When the underlying falls, the LEAPS call loses with it, and the premium is real money. A slow grind down is the worst case: the position bleeds value while never triggering a dramatic exit.
That is why exits are mechanical and losses are cut at defined levels. The premium is the cost of defined risk, not a promise of safety.
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