Long-term options, also known as LEAPS (Long-Term Equity Anticipation Securities), can be a powerful tool for traders looking to capitalize on long-term trends while leveraging their capital. However, knowing when and how to take profits on LEAPS positions is just as important as selecting the right contracts.

In this post, we’ll break down some effective profit-taking strategies to maximize gains and manage risk while holding long-term options.

Why Profit-Taking is Essential for LEAPS

Unlike short-term options, LEAPS have more time value and are less impacted by short-term fluctuations. However, if you don’t take profits at the right time, you risk losing gains due to:

✔ Time decay accelerating as expiration nears.
✔ Stock reversals wiping out paper profits.
✔ Volatility drops, reducing premium value.

To prevent this, you need a structured exit plan instead of just holding until expiration.

Best Profit-Taking Strategies for LEAPS

1. The “Sell Half” Strategy – Lock in Gains & Ride the Rest

This is one of the best ways to de-risk your trade while maintaining upside exposure.

How it works:

• When your LEAPS option reaches 100-200% gain, sell half of your position.
• This locks in profits while allowing you to hold the rest for potential further gains.
• If the stock pulls back, you’ve already secured profits.

📌 Example:

• You buy 2 contracts of a $50 strike call expiring in 2026 for $10 ($1,000 per contract).
• Stock surges, and the option is now worth $20 ($2,000 per contract).
• You sell 1 contract, locking in $1,000 in profit while keeping one contract for future gains.

✅ Pros:

• Takes partial profits while keeping upside potential.
• Reduces exposure without exiting completely.

🚫 Cons:

• If the stock keeps running, you only have half the position left.

2. Scaling Out in Thirds (1/3 Rule)

Instead of selling half at once, you can scale out gradually in three stages.

How it works:

• Sell ⅓ of your position at +100% gains.
• Sell another ⅓ at +200% gains.
• Hold the last ⅓ as a “runner” for larger upside potential.

📌 Example:

• You buy 3 contracts for $5 each ($500 per contract).
• When they reach $10, sell one contract (locking in profit).
• When they reach $15, sell another.
• Let the last contract run until close to expiration or a major stock move.

✅ Pros:

• Maximizes profits while managing risk.
• Provides flexibility based on market conditions.

🚫 Cons:

• Requires patience and discipline to exit gradually.

3. The “Roll Up & Out” Strategy – Extend Profits

Instead of selling your LEAPS outright, you can roll the position into a new one to extend your exposure while taking partial profits.

How it works:

• When your LEAPS contract doubles or triples, sell it and buy a further out-of-the-money (OTM) option with longer expiration.
• This lets you secure gains while maintaining upside potential.

📌 Example:

• You own a $50 call expiring in 2025, which has gone from $10 to $25.
• You sell that contract and buy a $70 call expiring in 2026 for $10.
• Now, you’ve taken $15 profit per contract while keeping upside potential in a new position.

✅ Pros:

• Locks in profit while keeping exposure to the stock’s trend.
• Reduces risk without completely exiting.

🚫 Cons:

• The new position might take time to appreciate.
• If the stock reverses, the new option may not gain value as expected.

4. Profit Targets Based on Technical Levels

Instead of selling based on percentage gains, you can use technical levels to time exits.

How it works:

• Identify key resistance levels (previous highs, moving averages, Fibonacci retracements).
• Plan to take profits when the stock reaches these levels.
• If the stock breaks through resistance, you can keep holding until the next level.

📌 Example:

• You own LEAPS on Tesla (TSLA), and the stock is approaching a major resistance at $300.
• You decide to sell 50% of your position at that level.
• If the stock breaks through, you hold the rest until $350 (next resistance).

✅ Pros:

• Lets the trend play out naturally.
• Takes advantage of technical price action.

🚫 Cons:

• If the stock reverses before reaching the target, profits may shrink.

5. “Time-Based Exit” – Selling Before Time Decay Accelerates

The closer an option gets to expiration, the faster time decay (theta) erodes its value.

How it works:

• Sell your LEAPS 6-12 months before expiration to avoid aggressive theta decay.
• If your LEAPS is in the money and deep into profit, cashing out earlier prevents giving back gains.

📌 Example:

• You buy a 2025 LEAPS call in 2023.
• By mid-2024, you’re up 150%. Instead of waiting until expiration, you sell before time decay accelerates.

✅ Pros:

• Avoids getting stuck with an expiring option losing value fast.
• Ensures you don’t give back hard-earned gains.

🚫 Cons:

• If the stock keeps running, you miss extra potential gains.

Key Takeaways for Taking Profits on LEAPS

✅ Avoid holding LEAPS until expiration—sell early to prevent theta decay losses.
✅ Use scaling-out strategies like selling half at 100-200% gains.
✅ Rolling up/out helps lock in profits while keeping exposure.
✅ Sell based on technical resistance levels rather than emotions.
✅ Exit at least 6-12 months before expiration to prevent time decay losses.

By having a structured profit-taking plan, you can maximize gains and minimize risk when trading long-term LEAPS options.

What’s your favorite way to lock in profits on LEAPS? Let me know in the comments! 🚀📈