How Far Out Should LEAPS Be? Choosing the Right Expiration Date

How Far Out Should Your LEAPS Expiration Be?

The expiration date you choose for a LEAPS contract has a bigger impact on your returns than most traders realize. Too short and time decay eats into your position. Too long and you overpay for time premium you may not need.

The Theta Decay Curve

Time decay on options is not linear. It follows a curve that accelerates as expiration approaches. Here is how the daily theta behaves at different timeframes for a typical at-the-money option:

The difference between 24 months and 18 months is minimal. The difference between 6 months and 3 months is massive. This curve is why the 18-24 month sweet spot exists.

The 18-Month Sweet Spot

Most experienced LEAPS traders target 18-24 months to expiration. Here is why:

At 18 months, you are firmly in the flat part of the theta curve. Daily decay is small relative to your position size. You have a full year before theta starts to noticeably erode value.

At 24 months, you are paying extra time premium for six more months of protection against theta. That additional premium is not always worth it, especially on stocks with lower implied volatility.

The price difference between an 18-month and 24-month LEAPS call is often 10-15% more premium. Ask yourself: does six extra months of lower theta justify that cost?

When to Go Longer (24+ Months)

Buy the longer-dated LEAPS when:

Your thesis requires time. A company undergoing a multi-year turnaround needs more runway.

IV is low. When implied volatility is cheap, the extra time premium is a bargain.

You plan to sell calls against the LEAPS. A longer-dated long leg gives you more cycles of short call income to collect.

You do not want to manage the position actively. More time means less urgency to roll or adjust.

When 12-15 Months Is Enough

Shorter LEAPS can work when:

The catalyst is near-term. An earnings inflection expected within 6-9 months does not need 24 months of runway.

IV is high. You want to minimize the time premium you pay, and a shorter expiration reduces that.

You plan to roll early anyway. If your strategy is to sell when 6-9 months remain, starting at 15 months instead of 24 still gives you 6-9 months of flat theta before rolling.

The Roll Strategy

Many traders do not hold LEAPS to expiration. Instead, they follow a rolling strategy:

Buy LEAPS at 18-24 months

Hold through the flat theta period

Sell when 6-9 months remain (before theta accelerates)

Immediately buy a new LEAPS at 18-24 months

This keeps you perpetually in the low-theta zone. The cost is the spread between selling the shorter-dated option and buying the longer-dated replacement.

Expiration Month Matters

LEAPS typically expire in January. So in mid-2025, your choices are January 2027 (18 months) or January 2028 (30 months). There is no January 2027.5 option.

This means your practical choices are often limited to specific January expirations. Some heavily traded names like SPY and AAPL also offer June LEAPS, giving you more flexibility.

Check what expirations are actually available before committing to a specific timeframe. OptionsPilot's options chain data shows all available expirations so you can compare pricing across dates.

Bottom Line

Target 18-24 months to expiration for most LEAPS trades. This range gives you minimal theta decay, adequate time for your thesis, and the ability to roll before time decay accelerates. Go longer only when the extra time premium is cheap or your thesis demands it.