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+Chapter 25: LEAPS 385 
+Those familiar with holding equity calls and puts are more accustomed to seeing 
+an option lose 25% of its value in possibly as little as four or five weeks' time. Thus, the 
+advantage of holding the LEAPS is obvious from the viewpoint of slower time decay. 
+This observation leads to the obvious question: "When is the best time to sell my 
+call and repurchase a longer-term one?" Referring again to the figure above may help 
+answer the question. Note that for the at-the-money option, the curve begins to bend 
+dramatically upward soon after the 6-month time barrier is passed. Thus, it seems log­
+ical that to minimize the effects of time decay, all other things being equal, one would 
+sell his long at-the-money call when it has about 6 months of life left and simultane­
+ously buy a 2-year LEAPS call. This keeps his time decay exposure to a. minimum. 
+The out-of-the-money call is more radical. Figure 25-4 shows that the call that 
+is 20% out-of-the-money begins to decay much more rapidly (percentagewise) at 
+sometime just before it reaches one year until expiration. The same logic would dic­
+tate, then, that if one is trading out-of-the-money options, he would sell his option 
+held long when it has about one year to go and reestablish his position by buying a 2-
+year LEAPS option at the same time. 
+ADVANTAGES OF BUYING HCHEAP" 
+It has been demonstrated that rising interest rates or rising volatility would make the 
+price of a LEAPS call increase. Therefore, if one is attempting to participate in 
+LEAPS speculative call buying strategies, he should be more aggressive when rates 
+and volatilities are low. 
+A few sample prices may help to demonstrate just how powerful the effects of 
+rates and volatilities are, and how they can be a friend to the LEAPS call buyer. Suppose 
+that one buys a 2-year LEAPS call at-the-money when the following situation exists: 
+XYZ: 100 
+January 2-year LEAPS call with strike of 100: 14 
+Short-term interest rates: 3% 
+Volatility: below average (historically) 
+For the purposes of demonstration, suppose that the current volatility is low for XYZ 
+(historically) and that 3% is a low level for rates as well. If the stock moves up, there 
+is no problem, because the LEAPS call will increase in price. But what if the stock 
+drops or stays unchanged? Is all hope of a profit lost? Actually, no. If interest rates 
+increase or the volatility that the calls trade at increases, we know the LEAPS call will 
+increase in value as well. Thus, even though the direction in which the stock is mov­
+ing may be unfavorable, it might still be possible to salvage one's investment. Table 
+25-3 shows where volatility would have to be or where short-term rates would have