To buy a LEAP option, you first need options-trading approval at your brokerage, and then you use the platform’s option chain to find a contract on your chosen stock or ETF with an expiration date at least a year out, pick a call or a put and a strike price, and submit a limit order for the number of contracts you want. LEAPS (Long-Term Equity Anticipation Securities) are standardized options that can be listed with expirations up to 39 months from their initial listing date, which is what separates them from the weekly and monthly contracts filling most of the option chain.1Cboe Global Markets. Equity LEAPS Options Product Specifications They trade on individual stocks, ETFs, and roughly 20 index products.
Get Approved for Options Trading First
A standard brokerage account doesn’t let you buy options by default. Under FINRA Rule 2360, the firm has to collect information about your investment knowledge, experience, age, financial situation, and objectives before deciding whether to approve you and at what level.2FINRA. Regulatory Notice 21-15 The application asks for annual income, net worth, and how much experience you have with stocks, options, and other instruments. If you decline to provide some of the information, the firm must note that refusal and factor it into its decision.
Most brokers organize permissions into numbered levels. Buying long calls and long puts, which is all you need for a basic LEAP purchase, sits at the lowest level. Higher levels unlock spreads, uncovered writing, and other strategies you don’t need for a straight LEAP purchase. A branch manager or Registered Options Principal has to sign off on your approval, and within 15 days the firm sends your background and financial information back to you for verification.2FINRA. Regulatory Notice 21-15
Before your first trade, the broker must give you the Options Clearing Corporation’s disclosure document, formally titled “Characteristics and Risks of Standardized Options.” That delivery is required under SEC Rule 9b-1.3The Options Clearing Corporation. Characteristics and Risks of Standardized Options It is dense reading, but it spells out how exercise, assignment, and expiration actually work, which matters more when your contract lives for two years.
Decide Between a Cash and Margin Account
You can buy LEAPS in either a cash account or a margin account, and the choice affects how much you have to put up.
In a cash account, you pay the full premium at purchase. In a margin account, LEAPS with more than nine months until expiration qualify for margin treatment: you post 75% of the option’s cost rather than the full amount.1Cboe Global Markets. Equity LEAPS Options Product Specifications Shorter-dated options generally require 100% of the premium, so this is a real capital advantage of long-dated contracts.
There’s a catch on the back end. Once your LEAP drops below nine months to expiration, it loses margin eligibility and the requirement jumps to 100% of the option’s current market value. If the option has appreciated by then, meeting that requirement can take more cash than you originally paid to buy it. Plan your position size with that transition in mind.
Find the Contract on the Option Chain
Buying a specific LEAP means making four decisions in sequence on the option chain: the underlying security, the expiration date, call or put, and the strike price. Each one narrows the chain until you’re looking at a single row with a bid and an ask.
Pick the Expiration Date
Type the ticker of the stock or ETF into your platform’s option chain and filter for expirations at least a year out. Equity LEAPS are listed with January expirations only, extending up to 39 months from the initial listing date.1Cboe Global Markets. Equity LEAPS Options Product Specifications On heavily traded stocks you’ll usually see two or three January dates available. A long-dated monthly option in, say, June is not a LEAP; if your platform doesn’t label them distinctly, check the year carefully before you click through.
Choose Call or Put
A call gives you the right to buy shares at the strike price. Choose a call if you expect the stock to rise over the contract’s life. A put gives you the right to sell shares at the strike price, which is useful when you expect a decline or want to protect a stock position you already own against a downturn.
Pick the Strike Price
The strike price sits at the center of the decision. It determines both your upfront cost and how likely the contract is to be profitable. Strikes are listed in numerical order down the option chain, and each one falls into one of three categories relative to the current stock price.
In the money means the strike is below the current stock price for a call, or above it for a put. These contracts cost more because they already have intrinsic value, and they behave more like the stock itself. A deep in-the-money LEAP call with a delta near 0.80 or higher moves almost dollar-for-dollar with the underlying, which is why some investors use them as a stock substitute.
At the money means the strike is roughly equal to the current stock price. These offer a middle ground on cost and sensitivity.
Out of the money means the strike is above the stock price for a call, or below it for a put. These are the cheapest contracts, but the stock has to move meaningfully before they gain any intrinsic value. The farther out of the money you go, the cheaper the premium and the lower the probability of profit.
For a LEAP used as a stock substitute, experienced traders often lean toward deep in-the-money calls because a high delta means less of the premium is pure time value. For a speculative bet on a large move, out-of-the-money contracts give more leverage but a higher chance of expiring worthless.
Check Liquidity Before You Commit
Once you’ve narrowed to a specific strike, look at the volume and open interest columns. Open interest tells you how many contracts are currently outstanding at that strike and expiration, and higher open interest generally means tighter bid-ask spreads. LEAPS on widely traded names usually have adequate liquidity at common strikes, but less popular tickers can show spreads wide enough to eat a meaningful chunk of any profit. A rough rule: if the spread between bid and ask is more than about 10% of the ask price, weigh whether that liquidity cost is acceptable.
Read the Greeks Before You Buy
The option chain shows sensitivity metrics called the Greeks. Two of them shape a LEAP buyer’s decision.
Delta measures how much the option’s price changes when the stock moves one dollar. LEAPS have low gamma (the rate at which delta itself changes), so their delta stays relatively stable through small price swings. A deep in-the-money LEAP call might carry a delta of 0.80, meaning it captures about 80 cents of every dollar the stock moves. An at-the-money LEAP call typically sits around 0.50 to 0.60 because the long time horizon leaves the stock more room to end up in the money. Checking delta before you buy tells you how stock-like the position will feel.
Theta measures how much value the option loses each day from the passage of time. The advantage of a LEAP is that theta is not linear: decay starts slow and accelerates as expiration approaches.4The Options Industry Council. Theta A LEAP with 18 months left might lose only a few cents per day to time decay, while that same option with 30 days left could lose several dollars daily. Slow early decay is the core reason to buy a long-dated option rather than a series of short-term ones.
Place the Order
Once you’ve locked in a contract, execution is straightforward. On the order ticket, enter the number of contracts you want to buy. Each contract controls 100 shares of the underlying stock, so a single LEAP call at a $5.00 premium costs $500 plus fees.
Pick your order type. A limit order lets you specify the maximum price you’ll pay, and it’s almost always the right choice for a LEAP. Long-dated options tend to have wider bid-ask spreads than weeklies, so a market order can fill at the ask or worse. Set your limit somewhere between the bid and the ask, with the midpoint a common starting place, and be willing to wait. If the order doesn’t fill, adjust the limit upward in small increments.
The confirmation screen shows the total estimated cost, including the premium and any per-contract commission. Most major retail brokers charge between $0.50 and $0.65 per contract for options trades, with some platforms also passing through small exchange and regulatory fees. Review the details and submit. The order appears on your activity or orders tab as open until the exchange matches a seller at your price. When it fills, the position shows up in your portfolio and you receive an electronic confirmation. Rejected orders usually trace back to insufficient funds or buying power.
Know What Happens at Expiration
Buying a LEAP commits you to one of three outcomes at the end of the contract’s life, and it’s worth understanding them before you buy rather than after.
LEAPS are American-style options, meaning you can exercise them at any point before expiration, not just on the expiration date.5Merrill Edge. Exercising Options In practice, most holders never exercise. They sell to close in the market and pocket the difference between what they paid and the current premium. The reason is straightforward: if a call is $5 in the money but trading at an $8 premium, selling captures the full $8 per share, while exercising captures only the $5 of intrinsic value and forfeits the remaining time value.
If you do nothing and your LEAP is in the money by at least $0.01 at expiration, the OCC’s “exercise by exception” process automatically exercises it. For a call, that means buying 100 shares per contract at the strike, which requires enough cash or margin capacity to cover the purchase. If your account can’t handle that, your broker may liquidate the position or other holdings to meet the obligation. You can prevent automatic exercise by submitting a “Do Not Exercise” instruction before your broker’s cutoff, typically by mid-afternoon on the last trading day.
If the stock closes below the strike for a call, or above the strike for a put, the contract expires worthless and you lose the entire premium paid. There is no further obligation.
One more thing worth flagging before you buy: taxes on options can get involved, especially if you exercise a call and acquire shares (the holding period for those shares starts the day after exercise, not the day you bought the option) or if you sell a stock at a loss and buy a LEAP on the same name within 30 days, which triggers the wash sale rule.6Internal Revenue Service. Publication 550 (2024), Investment Income and Expenses7Office of the Law Revision Counsel. 26 U.S. Code 1091 – Loss From Wash Sales of Stock or Securities Keep records of every transaction date and premium from the first purchase onward.