Would you recommend to a buy & holder with limited cash, to buy 2001 Strike: 100 LEAPS ?
That would be OK I think, but if you are really a "buy and hold" guy, you might want to consider just buying the stock. You won't have to pay taxes until you sell. Even though LEAPS appreciate faster than the stock, they also deteriorate a little every day, and the closer you get to expiration, the quicker they decay. So, you'll probably have to consider selling them as Freeus said, long before they expire, and switching to the 2002s. But, that means you'll have to pay taxes. It's a trade-off.
Below is a table showing how fast options decay. The first column is for calls with a strike price the same as the current stock price. The second column is for calls with a strike price that is 20% higher than the current stock price. So, for example, with 24 months remaining, an at-the-money call is losing .12% each day.
Daily Percent Decay of Options
Months At-the 20% Out-of-
Remaining Money Money
24 .12 .18
18 .14 .27
12 .19 .55
9 .22 .76
6 .27 1.18
3 .60 3.57
2 .73 4.43
Source: L.G. McMillan, Options as a Strategic Investment.
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