Die Heuning Pot Literature Guide
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Finance Glossary

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LEAPS

Definition:

LEAPs are "long-dated options". They are used for hedging positions with longer term holdings. Example: Crazy Uncle Fester died and left you his fortune, which amounts to 10 million shares of GE. (He had a thing for light bulbs.) You are very happy being worth a few hundred million dollars and just don't want to lose that money. But if you sell the shares, you will pay a tax because the IRS views that process as a "constructive sale". But you would likely be able to construct a LEAP which hedges your position and allows you to play golf all day and quit the burger flipping gig you used to have.

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