How Does a Long-Term Equity Anticipation Security (LEAPS) Option Differ in Terms of Theta Decay?

A LEAPS (Long-term Equity Anticipation Security) option is a standard American or European-style option with an expiration date far in the future, typically one to three years out. Due to its long maturity, a LEAPS option has a much lower theta decay rate compared to a short-term option.

The time value is spread over a much longer period, making it a more capital-efficient way to take a long-term directional view without the rapid erosion of premium.