Question

Long term equity anticipation securities (leaps) are a form of option that gives the holder the right to buy newly issued shares of stock directly from the issuing corporation.
a. true
b. false

Answer 1

Long term equity anticipation securities (leaps) are a form of option that gives the holder the right to buy newly issued shares of stock directly from the issuing corporation. False

Long-term equity anticipation securities (LEAPS) are publicly traded options contracts with expiration dates that are two to three years out from the date of issuance, usually more. Despite having longer expiration dates, they perform indistinguishably from the majority of the other alternatives given. The right, but not the responsibility, to buy or sell the underlying asset at the predefined price on or before the contract's expiration date is provided by a LEAPS contract to the buyer, depending on whether the option is a call or a put. Investors need to be aware that these lengthy contracts will involve a financial commitment.

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