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Q: What are cycles? And how are they affected when LEAPS� are listed?
A: Options on a given stock are listed according to one of the following expiration cycles:
| Cycle 1 |
January |
Arpril |
July |
October |
| Cycle 2 |
February |
May |
August |
November |
| Cycle 3 |
March |
June |
September |
December |
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At any given time, there will normally be four different expiration months trading on a particular stock. All stocks will have options listed for the two upcoming expiration months along with two months from their expiration cycle. The table below illustrates the months listed for each cycle throughout the year, beginning on the first day of the year. The most recently listed months are highlighted in bold.
at start of calendar year...
| Cycle 1 |
January |
February |
April |
July |
| Cycle 2 |
January |
February |
May |
August |
| Cycle 3 |
January |
February |
March |
June |
|
the above months are listed
after January expires...
| Cycle 1 |
February |
March |
April |
July |
| Cycle 2 |
February |
March |
May |
August |
| Cycle 3 |
February |
March |
June |
September |
|
September is added to cycle 3
after February expires...
| Cycle 1 |
March |
April |
July |
October |
| Cycle 2 |
March |
April |
May |
August |
| Cycle 3 |
March |
April |
June |
September |
|
October is added to cycle 1
after March expires...
| Cycle 1 |
April |
May |
July |
October |
| Cycle 2 |
April |
May |
August |
November |
| Cycle 3 |
April |
May |
June |
September |
|
November is added to cycle 2
after April expires...
| Cycle 1 |
May |
June |
July |
October |
| Cycle 2 |
May |
June |
August |
November |
| Cycle 3 |
May |
June |
September |
December |
|
December is added to cycle 3
after May expires...
| Cycle 1 |
June |
July |
October |
January |
| Cycle 2 |
June |
July |
August |
November |
| Cycle 3 |
June |
July |
September |
December |
|
January is added to cycle 1
after June expires...
| Cycle 1 |
July |
August |
October |
January |
| Cycle 2 |
July |
August |
November |
February |
| Cycle 3 |
July |
August |
September |
December |
|
February is added to cycle 2
after July expires...
| Cycle 1 |
August |
September |
October |
January |
| Cycle 2 |
August |
September |
November |
February |
| Cycle 3 |
August |
September |
December |
March |
|
March is added to cycle 3
after August expires...
| Cycle 1 |
September |
October |
January |
April |
| Cycle 2 |
September |
October |
November |
February |
| Cycle 3 |
September |
October |
December |
March |
|
April is added to cycle 1
after September expires...
| Cycle 1 |
October |
November |
January |
April |
| Cycle 2 |
October |
November |
February |
May |
| Cycle 3 |
October |
November |
December |
March |
|
May is added to cycle 2
after October expires...
| Cycle 1 |
November |
December |
January |
April |
| Cycle 2 |
November |
December |
February |
May |
| Cycle 3 |
November |
December |
March |
June |
|
June is added to cycle 3
after November expires...
| Cycle 1 |
December |
January |
April |
July |
| Cycle 2 |
December |
January |
February |
May |
| Cycle 3 |
December |
January |
March |
June |
|
July is added to cycle 1
after December expires...
| Cycle 1 |
January |
February |
April |
July |
| Cycle 2 |
January |
February |
May |
August |
| Cycle 3 |
January |
February |
March |
June |
|
August is added to cycle 2
When determining the cycle to which a particular stock belongs, pull up a chain of its options match the 3rd and 4th expiration months with the relevant table above, and identify the cycle.
Notice that January expirations for cycle 1 are normally listed after the May options expire. Since January LEAPS� are already trading, the following schedule is used to introduce a new series of LEAPS�:
Cycle 1:
- Monday, May 13: Jan 2003 LEAPS� meld*.
- Monday, May 20: January expirations listed
- Tuesday, May 28: January 2005 LEAPS� listed
Cycle 2:
- Monday, June 17: Jan 2003 LEAPS� meld*.
- Monday, June 24: February expirations listed
- Monday, July 1: January 2005 LEAPS� listed
Cycle 3:
- Monday, July 15: Jan 2003 LEAPS� meld*.
- Monday, July 22: March expirations listed
- Monday, July 29: January 2005 LEAPS� listed
Please note that for cycle 2 and cycle 3 options, after the new LEAPS� have been listed there will be an extra month available (2 short-term expirations, 2 cycle expirations, 2 LEAPS� expirations, AND the January expiration that was originally a LEAPS�)
* To meld: change the symbol on a LEAPS� option to that of a �normal� option. The terms of the option itself do not change.
Q: Where can I find information on LEAPS� options and various strategies based on LEAPS�?
A: You can find delayed quotes for LEAPS� here on our site under Quotes, just select "Just Show Me the LEAPS�". Also in our Education section you will find a discussion of what LEAPs are and how they work.
Q: I recently attended a seminar where the instructor said that some brokers recognize LEAPS securities as stocks and will allow writing of covered calls against LEAPS, even in retirement accounts. I have searched since this time and have not found a broker that will allow this strategy in a retirement account. Do you have a suggestion?
A: Buying a long-term call and selling short-term calls against it, an example of a calendar spread, is a popular strategy. However, while the calls being written are hedged, they are not considered to be "covered." In the event of assignment, because of the 1-day lag between exercise and assignment, using the long-term call to close out the position would require being short the stock for a day. And many brokerages do not allow short stock positions in retirement accounts under any circumstances. We can only suggest that you continue searching for a broker that allows this strategy.
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