Long-term equity anticipation securities are no different from short-term options except for the later expiration dates.
Lengthier times until maturity allow long-term investors to gain exposure to prolonged price movements.
Intrinsic value is the calculated or estimated value of how likely the option is to make a profit based on the difference between the asset's market and strike price.
This value may include profit that already exists in the contract before purchase.
An investor must understand that they will be tying funds up in these long-term contracts.
Changes in the market interest rate and market or asset volatility may make these options more or less valuable depending on the holding and the direction of movement.
Another advantage of LEAPS calls is that they let the holder sell the contract at any time before the expiration.
Short-term options have a maximum expiration date of one year.
Should it be less, the investor will allow the option to expire and will lose the price paid for the premium.