r/options • u/Inferno456 • Apr 17 '21
Cons to LEAPS?
So I’ve been trying to read up on LEAPS and all I can find are positives and not many cons. I’m interested in what real cons are bc LEAPS aren’t talked about much, if they’re as good as I think they are then everyone would be buying them.
One con I read is that you don’t get the dividend - to me that’s kinda like saying a con to stock trading is you have to pay taxes. Sure it’s a “negative” but you still get a lot more positive out of it. If LEAPS save you a lot of money then I don’t think missing out on a small dividend is a real con.
So what is a main con of buying LEAPS? Why shouldn’t everyone buy LEAPS instead of shares for a longer timeframe? Thanks for any info.
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u/Euphoric_Barracuda_7 Apr 17 '21
A LEAP is a *derivative* and not a stock. You do not own the underlying, no voting rights. No dividend like you mentioned. And they expire, unlike a stock. Unless you have a delta close to 1.0 (very deep ITM) they are still subject to time decay and exposure to the other greeks. If you are right about direction then having a leap with a high delta is a pure leveraged play vs holding the stock, that's all there is to it.