34 lines
2.3 KiB
Plaintext
34 lines
2.3 KiB
Plaintext
368 Part Ill: Put Option Strategies
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THE BASICS
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Certain facets of LEAPS are the same as for other listed equity options, while others
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involve slight differences. The amount of standardization is considerably less, which
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makes the simple process of quoting LEAPS a bit more tedious. LEAPS are listed
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options that can be traded in a secondary market or can be exercised before expira
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tion. As with other listed equity options, they do not receive the dividend paid by the
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underlying common stock.
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Recall that four specifications uniquely describe any option contract:
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1. the type (put or call),
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2. the underlying stock name (and symbol),
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3. the expiration date, and
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4. the striking price.
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Type. LEAPS are puts or calls. The LEAPS owner has the right to buy the stock at
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the striking price (LEAPS call) or sell it there (LEAPS put). This is exactly the same
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for LEAPS and for regular equity options.
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Underlying Stock and Quote Symbol. The underlying stocks are the
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same for LEAPS as they are for equity options. The base symbol in an option quote
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is the part that designates the underlying stock. For equity options, the base symbol
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is the same as the stock symbol. However, until the Option Price Reporting Authority
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( OPRA) changes the way that all options are quoted, the base symbols for LEAPS are
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not the same as the stock symbols. For example, LEAPS options on stock XYZ might
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trade under the base symbol WXY; so it is possible that one stock might have listed
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options trading with different base symbols even though all the symbols refer to the
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same underlying stock. Check with your broker to determine the LEAPS symbol if
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you need to know it.
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Expiration Date. LEAPS expire on the Saturday following the third Friday of
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the expiration month, just as equity options do. One must look in the newspaper, ask
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his broker, or check the Internet (www.cboe.com) to determine what the expiration
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months are, however, since they are also not completely standardized. When LEAPS
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were first listed, there were differing expiration months through December 1993. At
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the current time, LEAPS are issued to expire in January of each year, so some
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attempt is being made at standardization. However, there is no guarantee that vary
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ing expiration months won't reappear at some future time. |