Deep in-the-money LEAPS vs stock, worked through on one position: what you save, what you pay, and the date that changes everything

Published: 16 October 2026 · Last updated: 2 October 2026 · By Spencer Li, CFTe

Is a deep in-the-money LEAP just leveraged stock? Mostly, with three catches. A reader on Reddit’s options forum asked it almost word for word this year, “Is deep ITM LEAPS just leveraged stocks?”, and it deserves a straight answer.

A deep in-the-money LEAP is a call option with a strike well below today’s price and an expiry one to three years away. It moves almost dollar for dollar with the shares, for a fraction of the cash, so for most of its life it does behave like leveraged stock. The catches are that you pay for it in time value, you collect no dividends, and it has an end date. If the stock falls far enough, the whole premium can go to zero, which is a 100% loss on the cash you put in, from a fall that would have cost a shareholder 30%.

What is a deep in-the-money LEAP?

LEAPS stands for long-term equity anticipation securities, which is a long way of saying long-dated options. Cboe, the exchange that lists them, describes equity LEAPS as options that “expire in approximately two to three years from the date of initial listing,” with expiry months “up to 39 months from the date of initial listing, January expiration only.”

“Deep in the money” means the strike sits well below the share price. Most of what you pay is the value the option already has today, and only a small part is the bet on time.

Take a hypothetical stock at USD 100, with round numbers. A call with a strike of 70, expiring in two years, costs about USD 38 a share. Of that 38, 30 is the gap between the share price and the strike. The other 8 is time value, which is what you pay for everything else.

At that strike, the option moves roughly 89 cents for every dollar the stock moves. That is why it feels like owning the shares.

How does a LEAP compare with owning the shares?

One contract covers 100 shares. So the choice in the example is between USD 10,000 for 100 shares, or USD 3,800 for one LEAP that tracks most of their move.

Here is how the two compare two years later, at expiry, before any dividends.

Read the rows in pairs.

When the stock rises a lot, the LEAP roughly doubles the shareholder’s percentage gain. When it rises a little, the LEAP barely beats breakeven, because the 8 of time value has to be earned back first. When the stock goes nowhere for two years, the shareholder is flat and the LEAP holder is down a fifth.

And at 70, the shareholder has lost 30% and still owns a company. The LEAP holder has lost everything.

A 30% fall in the stock is a 100% loss on the LEAP.

Loan, Floor, Clock: what the time value really buys

So where does that USD 8 of time value go? I find it easiest to think of it as buying two things and costing a third.

1. Loan. You get the move on USD 100 of stock while paying 38. In effect, you are deferring payment of the 70 strike for two years. Paying 8 to defer 70 for two years works out to roughly 5.7% a year, simple, on money you never see.
2. Floor. Below 70, the shareholder keeps losing, and the LEAP holder has already lost all of the 38. So part of the 8 buys a floor under your losses. On the same exposure, you can never lose more than the premium.
3. Clock. You pay for both with a date. If the move you expected arrives a month after expiry, it arrives for someone else.

Seen this way, the question becomes whether you would rather borrow to buy shares, or pay for a loan with a built-in floor and a deadline. That is a different choice from “cheap stock”.

What are the catches people miss?

The first catch is dividends. An option holder collects no dividend. The Options Industry Council says “A call holder is entitled to the dividend if the holder exercises the call prior to the ex-dividend date,” which means you have to give up the option to get the payment. On a stock that pays a few percent a year, that is a cost the table above leaves out.

The second catch is the roll. A LEAP has an end date, so holding the position for longer means selling it and buying a new one further out, and paying a fresh slice of time value each time. How a roll really works is in what happens when an option is assigned, rolled or expires.

The third catch is liquidity. A deep in-the-money strike far out in time can trade thinly, so check the gap between the bid and the ask on the strike you are looking at. The guide to options trading uses a simple screen: skip any strike with fewer than 1,000 contracts of open interest or under 300 traded a day.

The fourth catch is the one that blows up accounts, and it is size. Because one LEAP costs about 38% of the shares, it is tempting to put the full USD 10,000 into LEAPS instead. That buys roughly 2.6 contracts, the exposure of about 260 shares, and the 30% fall in the bottom row of the table wipes out all of it. The leverage was the attraction. It is also how a normal correction becomes a total loss.

Sizing a position as if it could go to zero is the same habit we teach for shares, forex and ETFs. Our free 15-Minute Swing Trader’s Checklist has the daily routine and the questions to ask before any trade. Get the free checklist →

How does a LEAP fit the 2-month rule in the options guide?

It does not, and the rule still stands.

In the options guide, one of the three rules is never to hold a bought option past 2 months, because time value bleeds. A LEAP is a bought option held for years, so the rule applies to it like any other bought option.

What the example does show is where the cost sits. In the deep in-the-money LEAP, 30 of the 38 is value the option already has, and 8 is time value that will be gone by expiry. So you can see the trade-off in plain numbers. You put up less cash than the shares and get a floor under the loss. In exchange you pay time value, give up the dividends, accept a date, and often a wide spread. The bleed on a LEAP is slower than on a short-dated option, and it is still a bleed.

So are deep ITM LEAPS just leveraged stock?

While they stay deep in the money, mostly yes. They track the shares closely, they need less cash, and you pay for the loan in time value instead of interest.

The difference shows up at the edges. A shareholder who is wrong can wait. A LEAP holder who is wrong has a date, and a 30% fall that a shareholder would sit through takes the LEAP to zero.

Whichever way you lean, the sizing habit is the same as for any bought option. Size it as if the whole premium could vanish, because in a bad two years it can. If the position only looks interesting when it is large, it is the leverage you want, rather than the company.

How much of the premium could you watch go to zero without changing your plans? And if the stock drifted sideways for two years, how would you feel about being down a fifth while the shareholder is flat? Those two answers will tell you more than the delta will.

FAQ

Are deep in-the-money LEAPS the same as owning stock?

Mostly, while they stay deep in the money, because they move nearly dollar for dollar with the shares. They differ in three ways: you pay time value, you collect no dividends, and the position ends at expiry.

What is the most you can lose on a LEAP?

You can lose the whole premium you paid. In the example, a fall from 100 to 70 or lower takes a USD 38 LEAP to zero, a 100% loss, while the shares are down 30%.

Do LEAPS holders receive dividends?

No. Only shareholders receive dividends, so a call holder has to exercise the option before the ex-dividend date to collect one, and that means giving up the option’s remaining time value.

How long do LEAPS last?

Equity LEAPS are listed with expiries of up to 39 months, according to Cboe, and expire in approximately two to three years from the date they are first listed.

Does Synapse Trading teach LEAPS?

No, we do not teach options at the moment. We teach end-of-day swing trading in shares, forex and ETFs, and the rule of sizing every position as if it could go to zero carries straight across.

Go deeper

This post covers one corner of options. If you would rather start with what we do teach, the free 15-Minute Swing Trader’s Checklist has the daily routine, the questions to ask before every trade, and the five rules that keep you in the game.

About the author. Spencer Li is The 15-Minute Trader and the founder of Synapse Trading. He is a Certified Financial Technician (CFTe) with 15+ years of trading, run from 70+ countries. He holds a B.Acc and B.BM from SMU. Every trade he takes is public, dated, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.

SGX or the US market, compared on what actually changes your result: liquidity, tax, currency and the clock

Published: 17 October 2026 · Last updated: 13 September 2026 · By Spencer Li, CFTe

Should a Singapore investor buy Singapore stocks or US stocks? It depends on what the money is for. For swing trading, the US market usually wins, because it has far more liquid stocks, tighter spreads and more names in a clean trend on any given week. For income paid in Singapore dollars, SGX often wins, because one-tier dividends are generally not taxed, there is no currency to convert, and there is no US estate tax to think about.

Plenty of people hold both, and that is a sensible answer.

Each market wins somewhere. The sections below show where.

Why did I plan to sell my Singapore stocks in 2017?

In May 2017 I wrote a post on this blog saying I was planning to cash out most of my Singapore portfolio. The STI had just pushed past 3,000, and the weekly chart told a different story. The index had spent about 7 years going sideways, which I called “somewhat unprecedented” at the time, while the US market kept creeping up.

I also wrote that trading volumes were waning, and that “it does seem like a dying market.”

Now, in fairness to SGX, a market I called dying has had a very good year. SGX reported that retail securities daily average value “surged 52% y-o-y in FY2026 to its highest level in 12 years.” So the picture in 2026 is livelier than it was in 2017. What has not changed is the gap in size and depth, and for a swing trader that gap is the whole story.

What is the real difference between SGX and US stocks?

Here are the two side by side, for someone based in Singapore.

New to CDP and custody? How SGX trading works shows where your shares sit.

Why does liquidity matter more to a trader than to an investor?

So why does it matter so much how actively a stock trades? Because a trader pays the spread every time, and a long-term investor pays it once.

A typical liquidity floor for a daily swing scan is a stock that trades at least 1 million shares a day or USD 50 million in value, with a bid-ask spread of 0.1% of the price or less. A floor like that suits the US market. Apply it to SGX and the list gets much shorter.

Here is what a wider spread does in practice. Say your stop sits 3% below your entry, which is a normal swing trade. You buy at the ask and sell at the bid, so a round trip costs you roughly one full spread.

• With a 0.1% spread, that is about 0.03R a trade.
• With a 0.5% spread, it is about 0.17R a trade.

Over 100 trades, that is roughly 3R against 17R. You pay it before the strategy has done a single thing for you. On a thin counter it gets worse, because when your stop triggers there are fewer buyers waiting and the fill can land well below your price. That hurts.

Then there is choice. A trend follower needs stocks that are trending, and thousands of liquid names will throw up more of them in any week. Do note that this is a numbers game, and says nothing about any single SGX stock.

For an investor who buys a bank or a REIT and holds it for years, none of this matters much. A 0.5% spread paid once in ten years is a rounding error.

What do US stocks cost a Singapore investor that SGX stocks do not?

This is where SGX earns its place. The extra costs of owning US stocks from Singapore come in four kinds.

1. Currency. Every Singapore dollar becomes a US dollar on the way in, and back again on the way out. The conversion spread does not appear on your commission line, but you pay it both ways.
2. Dividend tax. The IRS tells US payers to “Withhold at 30% or lesser tax treaty rate” on dividends paid to nonresidents. Singapore has no income tax treaty with the US, so most Singapore individuals see the full 30%. On a hypothetical stock yielding 4%, that is 1.2% of your capital a year, gone at source. Compare that with IRAS, which lists “Dividends paid to shareholders by a Singapore resident company under the one-tier corporate tax system” as generally not taxable.
3. Estate tax. This one is easy to miss. For nonresidents, the IRS counts “Stock of corporations organized in or under U.S. law” as a US-situated asset. An estate must file a US return “if the fair market value at death of the decedent’s U.S.-situated assets exceeds $60,000.” Check with a tax adviser for your own case, because the rules on what counts are detailed.
4. The clock. US markets open at 9:30pm Singapore time while the US is on daylight time, and close at 4am. If you want to watch the open, that is your evening gone.

On gains, the two markets come out about even for most people. The IRS says “capital gain income is not usually taxable to a nonresident alien,” and IRAS says “Gains from the sale of a property, shares and financial instruments in Singapore are generally not taxable.” That word “generally” matters if you trade very actively, and Is trading income taxable in Singapore? goes through what IRAS actually looks at.

Two of the four frictions have a common workaround for long-term investors. A US index fund that is domiciled in Ireland, listed in London, generally gets a lower withholding rate on its US dividends and generally sits outside the US estate rules. How to choose an index ETF from Singapore explains the domicile question in full.

The clock matters far less if you trade end-of-day. You read the US close over breakfast in Singapore, place your orders, and get on with the day. About 15 minutes, none of it at 3am.

If you want that daily routine in one page, our free 15-Minute Swing Trader’s Checklist has it, along with the questions to ask before every trade. Get the free checklist →

So which one should you choose?

Start from the job the money has to do, and let that pick the market.

That last row changed this year. SGX moved its board lot “From 100 units to 10 units for instruments priced above $10 and up to $100”, and to 1 unit above SGD 100, for the counters it has moved so far. A SGD 40 stock that used to need SGD 4,000 for one lot now needs SGD 400. So the old argument that SGX is too expensive for small accounts is much weaker than it was.

In May 2026 a trader asked on a Singapore investing forum whether anyone was slowly moving from their broker to CDP and Singapore assets, for estate planning reasons. It is a fair worry. The estate rule above is exactly why people ask it, and for a large US portfolio held for decades, moving some of it home is a reasonable answer.

If you do trade US stocks, the next question is which ones. How to find stocks to swing trade shows screener settings for the first cut.

Is one market better than the other?

Neither is better in general. Each is better at a different job.

SGX is a fine home for dividend income in your own currency. The US is where a swing trader finds the liquidity and the trends. The 2017 post was a trader’s view, and the 2026 numbers show it was too gloomy about SGX as a whole.

Two questions settle it for most people. Is this money for income you will spend in Singapore, or for a trading account that needs things to move? And how much of that 30% withholding are you paying today without noticing? Answer those, and the market picks itself. For the wider picture on trading shares, see the guide to stocks and CFDs trading.

FAQ

Is it better to invest in Singapore or US stocks?

It depends on the job. SGX suits dividend income in Singapore dollars, with one-tier dividends generally untaxed. US stocks suit swing trading and growth, with more liquidity, but they carry 30% dividend withholding, currency conversion and US estate tax exposure.

Do Singaporeans pay tax on US stock dividends?

Yes, at source. The IRS rule is to withhold 30% or a lower treaty rate on dividends paid to nonresidents, and Singapore individuals usually see the full 30%.

Do Singaporeans pay US estate tax on US shares?

They can. The IRS counts stock of US corporations as a US-situated asset, and an estate must file a US return if those assets exceed USD 60,000 at death. Check with a tax adviser for your own case.

What time does the US stock market open in Singapore?

At 9:30pm Singapore time during US daylight time, roughly March to November, and 10:30pm otherwise.

Are capital gains on SGX or US stocks taxed in Singapore?

Generally not, on either side. Very active trading can change the Singapore answer, so read the IRAS rules if you trade often.

Go deeper

Whichever market you pick, the habits are the same. The free 15-Minute Swing Trader’s Checklist has the daily routine, the questions to ask before every trade, and the five rules that protect your account.

About the author. Spencer Li is The 15-Minute Trader and the founder of Synapse Trading. He is a Certified Financial Technician (CFTe) with 15+ years of trading, run from 70+ countries. He holds a B.Acc and B.BM from SMU. Every trade he takes is public, dated, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.