LEAPS as a Stock Substitute

Today I was fortunate enough to attend the GAME III Forum which is hosted by Quinnipiac University and held annually in New York City.  GAME stands for Global Asset Management Education and the intent is to educate college students.  With over 1000 students in attendance today I would say they are doing a good job.

One of the speakers was discussing institutional investors and mentioned that the average holding period for a stock by an institution is under a year.  I would have guess a bit longer (my thought was 18 months) but either way institutions seem to be holding stocks for a short period of time.  SO short that it may make sense for them to take a look at LEAPS as a stock substitute.

LEAPS are very similar to standard options, but LEAPS have more than nine months until expiration.  The majority of LEAPS expire in January so currently January 2014 and January 2015 expirations would constitute the majority of LEAPS.  The January 2015 LEAPS expire beyond the average holding period for institutional investors so although the holder of a LEAPS Call does not receive a dividend and does not have voting rights like shareholders do, they can benefit from price appreciation from the underlying security.  LEAPS are definitely an option that should at minimum get a little consideration when institutions are bullish on a stock.