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Topic_14_E1 - Topic 14 Exercise 1 Stock Options LEAPS Most...

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Topic 14 Exercise 1 Stock Options LEAPS Most option contracts have a relative short maturity. LEAPS, Long-term Equity AnticiPation Securities, are options with maturities that can extend up to 39 months. These long-term options are available on a limited number of widely-traded securities and on a number of index contracts such as the Dow Jones Industrial Average and the Standard and Poor’s 100 Index. These long expiration options can be used as alternative strategies to traditional investing methods and provide investors with additional flexibility when pursuing hedging or speculative strategies. These instruments are described in a Chicago Board of Trade publication entitled LEAPS. After reviewing this publication, answer the following strategy questions: 1. Compare the purchase of deep in-the-money leaps to the purchase of the underlying stock. What benefits are offered by LEAPS relative to the actual purchase of stock?
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