What is a leap? LEAPS is an acronym for options contracts called a Long Term Equity Anticipation Security. Leaps are derivatives with a long term expiration date that have prices that fluctuate along with the underlying stock or index it is written on.

LEAPS have much longer time periods before expiration than traditional monthly options as LEAPS can be written a year or more in advance of their expiration date. Traditional option contracts were written with expiration cycles of 3, 6, and 9 months, and no option that could be written a year in advance of expiration before LEAPS were introduced. More recently, even weekly options began to be traded on some of the highest volume option chains. 

LEAPS were introduced for the first time by the Chicago Board Options Exchange (CBOE) in 1990. LEAPS are usually open for time periods of 1 or 2 years out to the expiration date. LEAPS for stocks usually expire in January of each year but for the highest volume option chains you can find LEAPS written for each monthly quarter and even every month a year out.  So, in March 2021, an option trader could buy or write a LEAPS option that would expire in at least January of 2022 or January 2023. SPY LEAPS are so liquid and in demand that they go all the way to December 2023.

LEAPS are priced and traded just like standard option contracts just with much longer time frames of a year or more so the Greeks react less to daily fluctuations in price action with such a long time from expiration. The most important consideration for LEAPS is their liquidity as the bid/ask prices may be far apart and at times it can take longer to get a fill than with traditional options as the volume is so much lower.  LEAPS are more liquid the closer to the current price and the closer in time they are. The farther from in-the-money strike prices and  current month they are, the less open interest and the wider bid/ask spreads option traders will likely see.  

LEAPS were originally derivatives used for stocks only; but currently they have become available for stock indices also.

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Leap Options Definition

SPY December 15,2023 Leap option chain for SPY on Yahoo Finance