LEAPS Options: How to Use Them Around Catalysts, With a CoreWeave Example

LEAPS are options with more than a year until expiration. They give a thesis time to play out, and a buyer can never lose more than the premium paid. That makes them a good fit for one kind of setup: a stock that has been heavily sold off, where the upside depends on a few catalysts over the next one to two years, and where the downside could be close to zero. This post shows how I would size up a LEAPS on such a stock, using CoreWeave as the example.

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Key takeaways

• LEAPS are long-dated options, usually expiring in January, one to three years out.
• They buy time. A thesis that needs several earnings reports, a refinancing or a change in market mood needs more than a few months.
• The loss is capped at the premium. On a stock that could fall to zero, that is the main reason to use them instead of shares.
• Time is not free. On CoreWeave, an at-the-money call to January 2028 costs about 38% of the stock price. The stock has to rise 38% by expiration just to break even.
• Catalysts set the expiration. The option has to outlast every event the thesis depends on, with room to spare.

What are LEAPS options?

LEAPS stands for Long-term Equity Anticipation Securities. They are ordinary calls and puts with a long life. Exchanges list them for many large stocks, with expirations one to three years out. On CoreWeave, the longest calls listed today expire in January 2028, June 2028, December 2028 and January 2029.

A LEAPS call works like any call: it gains when the stock rises above the strike, and it loses value as time passes. The difference is pace. A long-dated option loses its time value slowly at first, and most of the decay comes in the final months.

When LEAPS fit, and when they do not

LEAPS fit when:

• the thesis needs more than one catalyst, spread over a year or more;
• the stock could fall a long way if the thesis is wrong, and you want the loss fixed in advance;
• you want exposure to the upside without tying up the full cost of the shares.

They fit badly when the catalyst is weeks away, since a shorter option costs much less, and when implied volatility is very high, because you pay for that volatility across the whole life of the option. CoreWeave has the second problem, and the example below shows what it costs.

The example: CoreWeave after the sell-off

I do not hold CoreWeave or its options. This is an example of how I would evaluate a LEAPS, not a trade or a recommendation.

The sell-off. CoreWeave rents out GPU computing power to AI companies. Its stock closed at a record $183.58 on June 20, 2025. On October 27, 2026 it closed at $59.57, down 68% from that high. In October the selling sped up: concerns about how AI infrastructure gets financed, a bond sell-off that pushed the yield on its 9.625% notes due 2032 to about 15%, insider selling, and a Morgan Stanley price target cut from $99 to $70.

The thesis. A LEAPS on CoreWeave is a bet on two conditions:

1. The AI doomsday mood passes. Investors stop pricing AI infrastructure as a bubble about to burst.
2. The company does not go bankrupt in the near term. It keeps funding its build-out and turns its backlog into revenue.

What supports it. Second quarter 2026 revenue was $2.58 billion, up 112% from a year earlier. The revenue backlog was about $104 billion at June 30, with more than $25 billion of new commitments signed early in the third quarter. The company had about 3.7 GW of power under contract, of which 1.5 GW was active, so most of the contracted capacity is still to come online. In the second quarter it raised more than $13 billion of net new debt, so lenders were still funding it.

What argues against it. Interest expense was $640 million in the second quarter, against adjusted operating income of $128 million. Balance sheet debt was about $35 billion at June 30, about $52 billion including lease obligations. Bonds yielding near 15% show the credit market pricing real risk of default. If the second condition fails, the stock could go to zero.

That mix, large upside if both conditions hold and a possible total loss if one fails, is where a LEAPS makes more sense than shares. The worst case is the same: everything you put in. The difference is that the LEAPS puts much less in.

Choosing the expiration and the strike

Call prices at the close on October 27, 2026, with the stock at $59.57. Prices are the middle of the bid and ask.

Three things stand out:

• Volatility makes these expensive. Implied volatility on these calls is about 85% to 95%. On a calmer large stock, a two-year at-the-money call often costs 15% to 20% of the stock price. Here it costs 38% to 49%.
• In-the-money calls need the smallest move. The $40 call costs the most in dollars, but most of its price is intrinsic value. It breaks even with a 19% rise, and it behaves more like the shares.
• Out-of-the-money calls are cheap for a reason. The $100 call costs 21% of the stock, but the stock has to almost double by January 2028 for it to pay.

The extra year to January 2029 costs $6.65 more on the $60 call. Whether that is worth it depends on the catalysts.

Matching the expiration to the catalysts

For this thesis, the catalysts that matter over the next 12 to 18 months are:

• Quarterly earnings, starting with the third quarter report, expected in November. Each one shows whether backlog is turning into revenue and whether margins cover the interest bill.
• Power coming online. About 2.2 GW of contracted power is not yet active. Revenue depends on bringing it live on schedule.
• Financing. Every new loan or bond is a test of whether lenders still fund the build-out, and at what rate.
• The AI mood itself. Large customers' spending plans, reported each quarter, move the whole sector.

The January 2028 calls cover five earnings reports and more than a year of financing news. If the thesis has not started to work by then, it is probably wrong. The January 2029 calls give one more year for the same events, at a higher price. A practical rule: the option should expire at least two quarters after the last catalyst the thesis counts on, so you are not forced to sell into a bad week.

Earnings also affect the entry. Before a report, near-term implied volatility rises, and long-dated options rise with it, though less. Buying in two or three parts, some before the report and some after, spreads that risk.

What the January 2028 $60 call could return

Value at expiration, against the $22.40 paid, compared with buying the shares at $59.57:

The table shows the trade-off clearly. The call loses everything in any outcome where the stock ends flat or lower, while the shares only lose part. The call only wins big if the stock rises a lot. And if CoreWeave goes bankrupt, both lose everything, but the call cost $2,240 per contract, against $5,957 for 100 shares.

This is a table at expiration. Before expiration the call keeps some time value, so selling early after a rally usually captures more than these numbers show.

Sizing and exits

• Size by the full premium. Assume the whole premium can be lost, because on this stock it can. The position should be small enough that a total loss fits within my risk limit for one trade.
• Enter in chunks. Two or three entries around earnings rather than one order.
• Book profits along the way. If the stock recovers toward the $100 area, sell part of the calls instead of waiting for the full move.
• Cut the rent. After a rally, selling shorter-dated calls against part of the position lowers the cost of holding the LEAPS. With fewer short calls than long ones, most of the upside stays open. I explain this in Vertical vs Calendar Spreads.

FAQ

What does LEAPS stand for?

Long-term Equity Anticipation Securities: listed options with more than a year until expiration.

Are LEAPS better than buying the stock?

Not in general. They cost less and cap the loss at the premium, but they lose value over time and pay nothing if the stock ends below the strike. Shares never expire. LEAPS make more sense when the stock could fall to zero and the thesis has a clear time frame.

How far out should a LEAPS expire?

At least two quarters past the last catalyst the thesis depends on. More time costs more, so do not buy years you do not need.

Can you lose more than you paid for a LEAPS call?

No. A buyer's maximum loss is the premium. Selling LEAPS is different and carries much larger risk.

Which strike should I choose for a LEAPS call?

In-the-money calls move more like the stock and need a smaller rise to break even. Out-of-the-money calls cost less but need a big move. The choice depends on how far you expect the stock to go and how sure you are.

If you want to see how I choose the stock, the structure and the strike for a trade like this, book a free walkthrough of the Method.

This post is educational and is not investment advice. I hold no position in CoreWeave. Options involve substantial risk and are not suitable for every investor. Prices are delayed quotes from October 27, 2026.