Contracts running one to three years that move close to the stock itself because of their high delta. An alternative to owning shares outright with less capital.
What these contracts are
Long-dated options (LEAPS) are options expiring in a year or more, up to three years: the same structure with an unusual amount of time. Long life changes their character: theta is nearly asleep in the first year, and deep delta makes them closer to a mini stock than a fast contract.
Its best-known use: a stock substitute
A deep in-the-money two-year call with a 0.85 delta gives 85% of the stock's move for a third of its price or less: freed capital works elsewhere and the loss is capped by the contract's structure. A leverage-controlled substitute for those who understand its cost (time value paid, no dividends received).
Their own sensitivity
With long maturity vega swells: these contracts breathe with implied volatility far more than short ones. Buying them when volatility is cheap adds a tailwind, and buying at its peak starts the race carrying heavy weight.
Hypothetical example
A stock at $100: instead of buying a hundred shares for ten thousand, a two-year contract with a $70 strike and a 0.85 delta for $3,400. The stock rose 30% over a year: the contract gained about $2,500 (73% on capital), and the maximum loss was always $3,400 and no more.
Common mistake
Ignoring them until they turn short: a two-year contract becomes, in its last months, an ordinary contract that theta devours. Managing them means rolling or deciding before they enter the zone of sharp decay, not forgetting them in a drawer.
Where to see it on the platform
The options chain shows the long expirations available, and the calculator shows how time value is distributed across their long life.
