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References for Pricing and Trading Long-Dated Options

Article Quant Q&A · Author: Dhruv Mahajan
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Summary

This exchange collects suggested references for learning about long-dated options, including contracts with maturities of six months or more. The original question focuses on pricing and speculative trading, with particular interest in how rho and theta behave relative to shorter-dated options. The accepted response names a practical book on LEAPS strategies, a study of rho in long-dated commodity options, and academic work on pricing and hedging long-term options.

The response is a reading list rather than a tutorial: it gives no formulas, examples, performance evidence, or direct account of how the Greeks change with maturity. The commodity-options article may not transfer directly to equity options, and the cited book is described as not being strongly focused on pricing. Readers seeking speculative applications should therefore check each source’s scope and distinguish pricing and hedging analysis from trading guidance.

Key ideas

  • Long-dated options can have sensitivity profiles that merit focused study of rho and theta.
  • The suggested sources include a practical LEAPS book and research on long-term option pricing and hedging.
  • One cited article concerns commodity options, so its conclusions may not carry over directly to equity options.
  • The exchange supplies references but does not explain or quantify the Greeks itself.

Tags

OptionsDerivatives pricingVolatility
Full text
# Book/Reference on LEAPs/ Long dated options


# Book/Reference on LEAPs/ Long dated options












Can anyone suggest a book on pricing and trading in LEAPs / Long dated options (maturity atleast 6 months )or a generic book which covers this topic in great detail.

I’m specifically looking at how rho and theta for these options are different from short dated ones and how I need to consider that.

I found a couple good articles but they seem to be about hedging and not really speculative.

## Answer by Dimitri Vulis (score 3, accepted)

https://quant.stackexchange.com/a/58967

1 Not really pricing focused, but have you looked at: Marc Allaire and Marty Kearney. Understanding Leaps: Using the Most Effective Option Strategies for Maximum Advantage. McGraw-Hill 2002.

2 an article on the rho of long-dated commodity options, rather than equity options https://onlinelibrary.wiley.com/doi/abs/10.1002/fut.21954

3 Gurdip Bakshi, Charles Cao, Zhiwu Chen. Pricing and hedging long-term options.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.