Dawn Pennington

Why Options LEAP to New Ticker Symbols

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However, in odd-numbered years (2009, 2011, etc.), the root symbol used is "OQI." But in even-numbered years (2010, 2012, etc.) the LEAP series starts with the letters YFA.

Does this mean that you would have to take any action, as expiration Friday draws closer, if you'd purchased a LEAP in Cree that has OQI or YFA in the ticker? Not at all -- the ticker might change but the option play you had wanted to be in remains the same.

So, if you were expecting for your option trade to expire in a few months, there's no way that it would automatically "roll up" to a later expiration date. The only thing that would happen, however, is that your brokerage statement would start reflecting a change in ticker symbol. But other than this cosmetic change, you're still the holder of the option you bought in the first place.

Accordingly, if you would want to buy a nearer-term Cree option today (in any available month, not just in January, as newer months get added all the time), its ticker would begin with CQR.

It's also worth noting that all LEAPS don't change equally. While the renaming method we've just discussed applies to the majority of long-term options, there are a handful of cases in which the symbols don't roll at all.

In the case of some other stocks, though, the root ticker changes depending on the strike price. For example, for options with a strike price between $20 and $40 might bear the root symbol ERQ, but strike prices between $45 and $95 start with ERU.

Although the naming convention of LEAPS differs from fixed options, the concept behind using them as a trading tool remains the same. Fundamentally, you want to hold an option long enough to give yourself time to be right about the trade. LEAPS are subject to the same risks as any other options, so it's important to correctly choose the direction of the stock before making your investment.

However, the good news about having more time with your trade is that you have more opportunity to -- if it wasn't spot-on so far in advance of the option expiration date -- close the position and initiate another one that has a better chance of finishing profitably. And moving the odds in our favor as much as possible is the best strategy you can use when you're trading options!

For additional information on this topic, check out Dawn Pennington's "The Anatomy of a Stock Option Ticker" and "The Years May Change, But Options Tickers Can Stay the Same."