388 Part Ill: Put Option Strategies 
FIGURE 25-5. 
Call delta comparison, 2-year LEAPS versus 3-month equity options. 
90 
80 
70 
g 60 
; 50 
~ 
O 40 
30 t= 3 months 
20 
10 
O 70 80 90 100 110 120 130 
Stock Price 
Example: XYZ is trading at 82. There are 3-month calls with strikes of 80 and 90, and 
there are 2-year LEAPS calls at those strikes as well. The following table summarizes 
the available information: 
XYZ: 82 Date: January, 2002 
Option Price Delta 
April ('02) 80 call 4 s/a 
April ('02) 90 call 1 i/s 
January ('04) 80 LEAPS call 14 3/4 
January ('04) 90 LEAPS call 7 1/2 
Suppose the trader expects a 3-point move by the underlying common stock, from 82 
to 85. Ifhe were analyzing short-term calls, he would see his potential as a gain of F/s 
in the April 80 call versus a gain of 3/s in the April 90 call. Each of these gains is pro­
jected by multiplying the call's delta times 3 (the expected stock move, in points). 
Thus, there is a large difference behveen the expected gains from these two options, 
particularly after commissions are considered. 
Now observe the LEAPS. The January 80 would increase by 2¼ while the 
January 90 would increase by 1 ½ if XYZ moved higher by 3 points. This is not near­
ly as large a discrepancy as the short-term options had. Observe that the January 90 
LEAPS sells for half the price of the January 80. These movements projected by the