LEAP Options Trading - How to Scan, Select, and Profit from Long-Dated Calls

Long-Term Equity Anticipation Securities (LEAP) options trading lets you control a stock for over 1 year with less capital than buying shares. But how do you pick the right contracts? This article shows how to scan for opportunities, compare setups, and evaluate if long-dated calls can outperform simply owning the stock.

Key Takeaways

• LEAP options trading is a way to control a stock for a long period, usually 1-3 years, with less capital than buying shares outright
• LEAPs can amplify returns on fundamentally strong stocks while limiting downside risk compared to owning shares
• Traders can use targeted scans to find high-potential LEAP opportunities, from undervalued plays to strong momentum setups

Understanding LEAP Options Trading

LEAP options trading lets you control a stock for one to three years without paying the full cost of owning the shares. LEAPs are simply standard call or put options with expirations well beyond the typical few months. The longer life makes them a popular stock replacement tool. Instead of tying up thousands of dollars to buy shares, a trader can spend a fraction of that on a LEAP call and still benefit if the stock rises.

The main advantages are:

• Lower upfront capital compared to buying shares
• Full participation in upside beyond the strike price
• Defined maximum loss equal to the premium paid

There is still some risk:

• If the stock fails to move as expected before expiration, the LEAP can expire worthless. 
• Time decay is slower than short-term options, but it still eats into the value over time, especially in the final months.

Now, before we proceed, here is a quick infographic that sums up the core of what you need to know on trading LEAPs through Option Samurai:

Why Traders Use LEAPs as Stock Replacements

Buying 100 shares of a $50 stock costs $5,000. A LEAP call with a strike near the current price and two years to expiration might cost a few hundred bucks. Both give upside exposure, but the LEAP ties up far less capital. That extra cash can be used to diversify into other positions or kept as reserves.

This capital efficiency is one of the main reasons traders use LEAP options trading for long-term bullish ideas. It allows them to:

• Spread risk across multiple stocks instead of one concentrated position
• Keep liquidity available for new opportunities or risk management
• Limit maximum loss to the premium paid

While gains can be amplified if the stock rises, losses are capped at the initial option cost. For investors with strong conviction in a company’s long-term growth, replacing shares with LEAP calls can improve potential returns without committing the full share purchase price.

Finding Opportunities in LEAP Options Trading

Finding the right setups in leap options trading often starts with scanning for specific criteria. Option scanners like ours can filter contracts by fundamentals, momentum, and valuation, helping traders focus only on opportunities that fit their style. In fact, here is a table with an overview of the LEAP-related predefined scans we offer to our users:

These scans save time and focus attention on trades backed by both technical and fundamental logic. While the predefined lists are a good start, traders can also build custom LEAP scans by adjusting filters for volatility, sector, or earnings dates, tailoring leap options trading to their own market outlook and risk limits.

Example of a LEAP Trade Setup

Using our “LEAP Calls with High Return on Analysts’ Target Price” scan, we found an example on ADBE, ideal for a fundamental investor. The stock trades at $349.42, with an average analyst target of $480.83. The scan selects the cheapest long-term call on healthy stocks that could deliver strong gains if the target is met.

In this case, the $350 call expiring in about 13 months costs around $60 per share, or $6,000 for a standard contract. Here is the P&L of your strategy:

These should be your key takeaways from the chart above:

• Maximum loss: about $6,000 (the premium paid)
• Potential profit: over $7,000 if ADBE hits $480.83 within a year
• Breakeven price at expiration: $410 per share

This LEAP options trading setup offers clear risk limits and a defined upside. If ADBE moves toward its target, the percentage return on the LEAP could be much larger than holding the stock, while still requiring far less capital upfront.

Historical Backtest Results

If you are curious about the comparison between buying long-term (LEAP) calls vs stocks, we ran a backtest to see how they stacked up (and you can find the full study linked at the bottom of this article). In many cases, leap options trading delivered higher percentage returns thanks to leverage and a smaller capital requirement. The results showed that well-chosen LEAPs on quality stocks often outperformed a buy-and-hold stock approach over the same period. Just to give you an idea, here’s a teaser to the backtest results:

As you can see, the percentage return was significantly higher with long term options compared to stocks. The nominal return was lower with options, but this is merely because you would employ a fraction of the capital needed to buy the stocks on the same underlying companies.

Time decay was a factor, especially in the final months, so stock selection and timing were key. With the right underlying and entry point, LEAP calls offered a more capital-efficient path to strong returns than owning shares outright. You’ll find a link to our detailed study on the matter at the bottom of this article.

Managing Long LEAP Calls

Buying a long-dated call is just the beginning. Traders often adjust or hedge their LEAPs as the stock moves, either to lock in gains or reduce risk. Here are three common approaches:

Risks and Considerations

As a final word, while we really like LEAP options, we should clarify the risks. In leap options trading, time decay (theta) works slowly at first but speeds up in the final months, eating into value. 

Liquidity matters too: pick contracts with tight bid-ask spreads to avoid losing money on entry and exit. The risk is limited to the premium paid, but if the stock underperforms, you can still lose 100% of that investment. To improve odds, combine LEAP strategies with solid fundamental analysis and awareness of market trends. That way, you are not relying only on time and luck for a profitable trade.

Read More

• Research article: Buying LEAP calls vs stocks
• Predefined scan: LEAP Calls on Strong Stocks with Momentum and Upside
• Predefined scan: LEAP Calls on Deeply Oversold Stocks
• Predefined scan: LEAP Calls with High Return on Analysts' Target Price