In finance, Long-term Equity AnticiPation Securities (LEAPS) are derivatives that track the price of an underlying financial instrument (stocks or indices).
For example, in an article in Stocks, Futures and Options Magazine, Dan Haugh of PTI Securities & Futures suggests that stock investors can manage risk and price protection by considering the purchase of an exchange-traded fund (ETF) and "...buying put protection on that ETF with LEAPS."
In this example, risk is reduced when an investor in stock or ETFs buys enough LEAPS put options to protect all of the shares they own.
An investor can also buy a LEAPS call, giving them a long time (potentially more than one or two years) to profit if the underlying stock or ETF rises in price.
LEAPS are identical to standard options in how the investor gains or loses when trading them.