Dawn Pennington

Why Options LEAP to New Ticker Symbols

    Tweet This

Long-Term Equity Anticipation Securities, better known as LEAPS -- or, longer-term options -- are instruments that allow you to hold an option for a longer time frame than usual. At any given time, at least two series of these must be available to trade. This means that a particular set of LEAPS gives you the ability to buy options that have up to two full years until expiration).

LEAPS only expire in the month of January. So, if you go to check out the available options on some of your favorite stocks, you will see that many of them have options listed that expire in the current year, but they also have options with expiration cycles that occur in January of the coming year and in January of the year after that.

You will also see that they have different "root" symbols (i.e., the first few letters) than their near-term counterparts. But even though their ticker symbols look different, they are still representative of the same underlying stock.

What you might not know is that the ticker symbols that are assigned to LEAPS are not the tickers they will have when they finish their life cycles. Standard (that is, shorter-term) options tickers generally do not change throughout the life of their contracts, but LEAPS don't follow all the same rules as regular options.

When options that are set to expire in the near term were first created, they were once LEAPS -- assigned up to two years prior to that expiration date. Similarly, to take their place, the January 2009 series had to become available. So, those current options converted to "regular" (fixed) option symbols while the newly introduced LEAPS got assigned special LEAP tickers -- tickers that will change (again!) when the options come closer toward their expiration dates.

Why the change in symbols? As a LEAP comes within one year of its expiration date, its ticker gets reassigned to an upcoming series. (For example, the 2009 LEAP symbols get transferred to the 2011 series, and the 2010s live on in the 2012 series).

Then the original trade gets a new option ticker that no longer sets it apart as a LEAP (i.e., it now looks like the other fixed options). The logic is that this methodology helps traders to differentiate a longer-term option from a near-term one.

Using Cree (CREE) as an example, its near-term options bear the root symbol of "CQR." In fact, if you look up any current non-LEAP Cree options, you will see that all of the tickers begin with CQR.