Comments

Some remarks are in order regarding the role of dividends when LEAPS calls are used in place of stock. Unlike owning the stock, the owner of a LEAPS call does not receive any dividend distributed by the company. You must take this into account when comparing the performance of the option with the stock. In the previous example with XYZ, if the annual yield from dividends issued to stockholders is less than 1 percent, the performance comparisons shown previously are essentially unaffected. If XYZ paid annual dividends of 6 percent, however, this would significantly influence the performance comparison.

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