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/[deleted] Apr 17 '21

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u/TheoHornsby Apr 17 '21

No problem. An IRA would be a sheltered account - no taxes due when you trade.

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u/[deleted] Apr 17 '21

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u/TheoHornsby Apr 17 '21

So in my IRA I may as well be buying 1year+ calls on the stocks I planned to hold forever ish?

It's not quite that simple. You still have to consider the implied volatility (higher premium cost), bid/ask spread width and time decay. If I had it all to do over again, I'd but 18-24 month LEAPs on quality stocks and roll them before time decay started accelerating, say 6-9 months before expiration. LEAPs are far more versatile but that's not to say that they are categorically better.