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Want stock-like exposure without buying shares?
LEAPS vs ZEBRA
Two ways to get about 100 deltas for less cash than the shares. The difference is how much time value you pay for.
Rule of thumb
Holding for more than about three months, or planning to sell calls against it? Use a LEAPS. Playing a shorter move and unwilling to pay for time? Use a ZEBRA.
Option A
LEAPS
Buy 1 deep in-the-money call · 0.75–0.85 Δ · 1–2 years out
Profit
Loss
Stock now
Best for
Long-term views, low IV, and anyone who wants income from selling calls against it.
What you get
Low upkeep, long vega, and it pairs with short calls to make a PMCC.
Option B
ZEBRA
Buy 2 in-the-money calls · 0.70–0.80 Δ · sell 1 at-the-money call · 1–3 months out
Profit
Loss
Stock now
Best for
Short-to-medium bullish views, high IV, and traders who do not want to sell extra calls.
What you get
About 100 deltas a set, near-flat theta and vega, and a max loss equal to the debit.
Side by side
| LEAPS | ZEBRA | |
|---|---|---|
| Horizon | 6 months to 2 years | 2 weeks to 3 months |
| Extrinsic paid | A year or more of time value | Close to zero |
| Theta | Small daily cost that grows near expiry | About flat |
| Vega | Long: gains if IV rises | About flat |
| Delta | 0.75–0.85 per call | About 100 per set |
| Max loss | The debit | The debit |
| Income on top | Sell calls against it (PMCC) | None: the short call is part of the structure |
| Upkeep | Low: roll about once a year | Higher: roll each cycle; the short call can be assigned early |
| Prefers | Low IV (time value is cheap) | High IV (the call you sell pays more) |
How a LEAPS works
- One long call. The deep strike makes it move about 80% like the stock.
- You pay some time value up front, often 3–8% of the stock price. It decays slowly at first and faster in the last few months.
- Long vega: it gains when IV rises and loses when IV falls.
How a ZEBRA works
- 2 × 0.75 − 0.50 ≈ 100 deltas, like 100 shares. Pick the long strike so its time value is about half the short call's.
- The at-the-money call you sell is almost all time value, and roughly cancels the time value in the two you buy, so there is little theta to fight.
- Above the short strike it moves 1:1 with the stock. Below it the delta shrinks, and the most you can lose is the debit.
Live example
Payoff sketches are at expiry on a $100 stock, for shape only. Education, not advice: disclaimer.