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+Chapter 25: LEAPS 409 
+Thus, a neutral backspread involving LEAPS requires buyingfewer calls than a neu­
+tral backspread involving a 6-rnonth option on the long side. This is because the delta 
+of the LEAPS call is larger. The significant point here is that, because of the time 
+value retention of the LEAPS call, even when the stock moves higher, it is not nec­
+essary to buy as many. If one does not use the deltas, but merely figures that 3 to 2 
+is a good ratio for any diagonal backspread, then he will be overly bullish if he uses 
+LEAPS. That could cost him if the underlying stock declines. 
+Calendar Spreads. LEAPS may also be used in calendar spreads - spreads in 
+which the striking price of the longer-term option purchased and the shorter-term 
+option sold are the same. The calendar spread is a neutral strategy, wherein the 
+spreader wants the underlying stock to be as close as possible to the striking price 
+when the near-term option expires. A calendar spread has risk if the stock moves too 
+far away from the striking price (see Chapters 9 and 22). Purchasing a LEAPS call 
+increases that risk in terms of dollars, not percentage, because of the larger debit that 
+one must spend for the spread. 
+Simplistically, calendar spreads are established with equal quantities of options 
+bought and sold. This is often not a neutral strategy in the true sense. As was shown 
+in Chapter 9 on call calendar spreads, one may want to use the deltas of the two 
+options to establish a truly neutral calendar spread, particularly if the stock is not ini­
+tially right at the striking price. Out-of-the-money, one would sell more calls than he 
+is buying. Conversely, in-the-money, one would buy more calls than he is selling. 
+Both strategies statistically have merit and are attractive. When using LEAPS deltas 
+to construct the neutral spread, one need generally buy fewer calls than he might 
+think, because of the higher delta of a LEAPS call. This is the same phenomenon 
+described in the previous example of a diagonal backspread. 
+SUMMARY 
+LEAPS are nothing more than long-term options. They are usable in a wide variety 
+of strategies in the same way that any option would be. Their margin and investment 
+requirements are similar to those of the more familiar equity options. Both LEAPS 
+puts and calls are traded, and there is a secondary market for them as well. 
+There are certain differences between the prices of LEAPS and those of short­
+er-term options, but the greatest is the relatively large effect that interest rates and 
+dividends have on the price of LEAPS, because LEAPS are long-term options. 
+Increases in interest rates will cause LEAPS to increase in price, while increases in 
+dividend payout will cause LEAPS calls to decrease in price and LEAPS puts to