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LEAPS are long-term options that can serve as powerful tools for investors looking to leverage their positions over an extended period—generally over a year. While LEAPS typically consist of call options, which give the investor the right to purchase stock at a specific price over the life of the option, one can also consider put options if they anticipate a decline in the stock price.
Typically, LEAPS are categorized as "out of the money," meaning they are struck at a price significantly higher than the current market price of the underlying stock. For instance, if Tesla’s stock is currently priced at $420, an investor might buy a LEAP option with a strike price of $710 or even $800, paying a premium for that option that could yield significant returns if the stock moves favorably.