How to Buy a LEAP Correctly

Published on: 2026-03-02 · #options

Not financial advice. If you’re new to options: start smaller than your ego thinks is necessary.

A LEAP is usually a long dated option (often a year or more to expiration). People buy them to get:

  • directional exposure
  • defined downside (premium paid ie the cash you put down)
  • less capital outlay than shares

In simpler terms, its like the downpayment you put down when buying a house. But you don’t intend the buy the house (ignore assignments for now) you only want to place a directional bet that either the house price will go up or will go down. and you want to profit from it ofc. That’s the sales pitch.

Here’s the part that matters: LEAPs are leverage. Leverage is honest. It shows you how much of wuss you really are

.

1) Start With a Thesis That Has a Time Horizon

If your thesis is “this might go up,” a LEAP will happily take your money. Case in point look at AMZN 5 year chart.

A better thesis is:

  • what has to happen?
  • by when?
  • what would prove me wrong?

LEAPs don’t expire tomorrow, but they do expire.

2) Don’t Buy a Cheap Strike Just Because It’s Cheap

New traders love deep out-of-the-money calls because they’re affordable.

Affordable is not the same as good.

  • deep OTM = low delta = you need a big move
  • you’re paying mostly for hope and implied volatility

If you want stock like behavior, consider higher delta calls (often ~0.60–0.80).

Also remember that if the stock falls the delta drops too.

3) Pick an Expiry That Covers Your “Oops, It’s Taking Longer” Scenario

If your thesis needs 12 months, don’t buy a 13 month LEAP and act surprised when it’s tight.

Give yourself room:

  • longer dated options decay slower early on
  • your timeline will slip (also a gentle reminder that your timeline is slipping too)

4) Check Liquidity (Because Spreads Are Real Money)

Before you buy:

  • look at bid/ask spread
  • look at open interest / volume
  • look at IV but I’ll talk about it next

A wide spread is a hidden fee. The best way to do it imo is to place the order about 30% above the bid price provided that IV is low. if IV is high and you want the order to stay for a couple of days. Something closer to 10% should be ok.

Don’t FOMO brother, never pay the ask price.

5) Implied Volatility (IV)

If IV is elevated, LEAPs can be expensive even if the premium looks “reasonable.”

Things to consider:

  • IV rank / IV percentile
  • upcoming catalysts like earnings

Sometimes the best trade is waiting until the market stops being chaotic. Another best time is to buy after earnings, there’s an IV crush. But you might loose out on gains if the stock pops. So analyse and choose based on your tradeoffs.

6) Size It Like You Expect to Be Wrong

A good default is: size so a full loss of premium doesn’t wreck your month. LEAPs feel safer than short dated options. They’re still options.

7) Have an Exit Plan Before You Enter

Decide ahead of time:

  • where you take profit
  • what loss makes you exit
  • whether you’ll roll to a later expiry

If you don’t set rules, the market will set them for you. It’s ruthless bud.

The Humble Ending

A “correctly bought” LEAP is mostly boring:

  • not too far OTM
  • enough time
  • liquid chain
  • sized small enough to sleep

If that sounds less exciting than the screenshots on reddit. Looking at you wallstreetbets. It’s good. Those screenshots are mostly by gamblers.