What is one key characteristic of LEAP options?

What is one key characteristic of LEAP options?

• A. They have a maximum length of 6 months
• B. They can last up to 39 months
• C. They involve only call options
• D. They are always American-style options

Answer: (B)

LEAP options, which stand for Long-term Equity Anticipation Securities, are distinct in that they can have an expiration date that extends up to 39 months from the date of issuance. This characteristic allows investors to take a longer-term view of the underlying asset compared to standard options, which usually have shorter expiration periods. The extended duration of LEAPs is particularly beneficial for those who anticipate significant movements in the price of the underlying asset over an extended period, enabling them to capitalize on long-term trends in the market. Other options, such as a maximum length of 6 months or the notion that LEAPs must involve only call options or are exclusively American-style, do not accurately reflect the nature of LEAPs. LEAPs can include both call and put options and can be exercised in a manner consistent with American-style options, but they are not limited to just that format. The clarity of the expiration duration reinforces why B is the correct and defining characteristic of LEAP options.

LEAP options, which stand for Long-term Equity Anticipation Securities, are distinct in that they can have an expiration date that extends up to 39 months from the date of issuance. This characteristic allows investors to take a longer-term view of the underlying asset compared to standard options, which usually have shorter expiration periods. The extended duration of LEAPs is particularly beneficial for those who anticipate significant movements in the price of the underlying asset over an extended period, enabling them to capitalize on long-term trends in the market.

Other options, such as a maximum length of 6 months or the notion that LEAPs must involve only call options or are exclusively American-style, do not accurately reflect the nature of LEAPs. LEAPs can include both call and put options and can be exercised in a manner consistent with American-style options, but they are not limited to just that format. The clarity of the expiration duration reinforces why B is the correct and defining characteristic of LEAP options.