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Chapter 2. Option Basics > Listed Options and LEAPS Options

Listed Options and LEAPS Options

Traditionally, risk assessment for options is based on a very short lifespan, 8 months or less for listed options. The ever-growing popularity of LEAPS—long-term options that last as long as 36 months—changes the analysis. Even for the long position, the risk of ever-declining time value takes on a different context when looking 2 or 3 years ahead.

The availability of long-term options makes long positions more viable in many more situations. Longer term options contain far greater time value, of course, because time value is just that: the value of time. So, compared with a 6- or 8-month time span, a 24- to 36-month option has far greater potential—for both long and short positions.


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