Because of the relatively low impact of time value on the price of a young LEAP, one which is at the money should move more or less in line with the stock price as it rises. This gives it a delta of 1. If the stock falls so that the LEAP is out of the money, the delta will fall causing the decay in the option to be less than that of the stock. Until the stock rises to get the option back at or in the money, the delta will remain below 1. You can share in the upside of the stock and later sell the option and collect the premium or, you could actually purchase the shares at the strike price and continue to own them.
Risk is limited to the cost of the premium.
In addition, if the stock goes south unexpectedly, the large amount of time value should allow you to recoup a significant portion of your premium. My intention was to give you some food for thought and a direction for further study. I Private Portfolios 1998-2000, StreetForce. All Rights Reserved. Use of this site is subject to certain terms and conditions.