390 Part Ill: Put Option Strategies 
The LEAPS put delta curve is flat, just as the call delta curve was. Moreover, 
the delta is not very large anywhere across the figure. For example, at-the-money 2-
year LEAPS puts move only about 30 cents for a one-point move in the underlying 
stock. LEAPS put buyers who want to speculate on a stock's downward movement 
must realize that the leverage factor is not large; it takes approximately a 3-point 
move by the underlying common for an at-the-money LEAPS put to increase in 
value by one point. Long-term puts don't mirror stock movement nearly as well as 
shorter-term puts do. 
In summary, the option buyer who is considering buying LEAPS puts or calls as 
speculation should be aware of the different price action that LEAPS exhibit when 
compared to shorter-term options. Due to the large amount of time that LEAPS have 
remaining in their lives, the time decay of the LEAPS options is smaller. For this rea­
son, the LEAPS option buyer doesn't need to be as precise in his timing. In general, 
LEAPS calls move faster when the underlying stock moves, and LEAPS puts move 
more slowly. Other than that, the general reasons for speculative option buying apply 
to LEAPS as well: leverage and limited risk. 
SELLING LEAPS 
Strategies involving selling LEAPS options do not differ substantially from those 
involving shorter-term options. The discussions in this section concentrate on the two 
major differences that sellers of LEAPS will notice. First, the slow rate of time decay 
of LEAPS options means that option writers who are used to sitting back and watch­
ing their written options waste away will not experience the same effect with LEAPS. 
Second, follow-up action for writing strategies usually depends on being able to buy 
back the w1itten option when it has little or no time value premium remaining. Since 
LEAPS retain time value even when substantially in- or out-of-the-money, follow-up 
action involving LEAPS may involve the repurchase of substantial amounts of time 
value premium. 
COVERED WRITING 
LEAPS options can be sold against underlying stock just as short-term options can. 
No extra collateral or investment is required to do so. The resulting position is again 
one with limited profit potential, but enhanced profitability (as compared to stock 
ownership), if the underlying stock remains unchanged or falls. The maximum prof­
it potential of the covered write is reached whenever the underlying stock is at or 
above the striking price of the written option at expiration. 
The LEAPS covered writer takes in substantial premium, in terms of price, 
when he sells the long-term option. He should compare the return that he could