2 out of 300: introducing the LEAPS screen.

Most screeners are built to give you a list. This one is built to say no. Of the 300 best-ranked companies on the Vance value screen on Friday, 16 October, two passed all five of the LEAPS screen’s filters: SanDisk and Micron. Here is what the screen does, why so few get through, and what the two that did actually cost.

What a LEAP is, and why anyone uses one

A LEAP is an ordinary option that expires a long way off, more than a year. The screen looks for three ways people use them. Stock replacement: one deep in-the-money call in place of 100 shares, for a fraction of the cash, that moves roughly 80 cents for every dollar the stock moves. The Poor Man’s Covered Call: the same kind of call, with a short-dated call sold against it each month for income. Hedging: puts on the S&P 500 or the Nasdaq-100 that gain if the market falls hard.

Each of them can go wrong in ways owning shares cannot, and the last section of this note is about exactly that.

Five filters, in one pass

For every company, the screen picks the call 12 to 24 months out with a delta closest to 0.80, then checks it five ways:

• Delta 0.75–0.85. Deep enough in the money that most of the price is real value, not time premium.
• 365+ days to expiry. Time decay is slow in an option’s first year and speeds up at the end.
• Volatility rank under 30. Options are cheaper when a stock is calmer than usual for it.
• Open interest 500+ and a bid/ask spread within 10%. Long-dated options trade thinly; a wide spread is a cost paid going in and again coming out.
• Above the 200-day average. A call is a bet the stock goes up. It helps if it already is.

Why only two

Liquidity is the wall. Of the 122 companies with a call in range, 112 failed it: too few contracts open, or too wide a gap between the bid and the ask. That is not an accident of the night. The value screen is built to find companies the market is overlooking, and overlooked companies tend to have quiet option markets. Cricut, first on the value screen that night, has no call that fits the LEAPS range at all.

Volatility was the next hurdle, failing 106 of the 122, and the 200-day trend failed 53. Most companies miss more than one.

The two that passed

Read the time-premium column before the cost column. On SanDisk, $244 of the call’s $537 price per share is time premium, money that is gone by January 2028 whatever happens. The stock has to rise about 19% by then just for the call to break even. Both are memory-chip makers whose options price in high volatility (74% a year for SanDisk, 52% for Micron). Their volatility rank passed because that is calm for them, not because it is calm.

Passing every filter says the option market and the arithmetic line up tonight. It is not a forecast, and two names from the same industry is a reminder that a filter can concentrate risk as easily as reduce it.

The near misses

Fourteen more companies passed four of the five. A few show how each filter bites. CarMax had 739 contracts open but a 12% spread. Gilead was liquid and in an uptrend, but its options were priced at the top of its own volatility range. Corcept passed everything except liquidity, with no contracts open at all. American Eagle and Coeur Mining were liquid and calm, but trading below their 200-day averages. The full list, updated every weeknight, is on the LEAPS screen.

The other two setups

For the Poor Man’s Covered Call, the screen shows only pairs that pass a strike check: the gap between the two strikes must be larger than the net cost, or being called away early locks in a loss. On Friday, Gilead’s January 2028 $120 call paired with a November $170 call brought in $219 of premium, about 4.8% of the LEAP’s cost, for one month. That is one month at one month’s prices, not a yield.

For hedging, a SPY put 5% below Friday’s price, expiring December 2027, cost about $3,450 a contract: roughly 3.9% of the index per year of protection. That is what insurance against a deep fall costs, and it is paid every year, whether anything bad happens or not.

What can go wrong

A call has an expiry date. The stock can be right in the end and the call still expire worthless if the move comes after the expiry date. A $30,000 call can lose $30,000; the leverage that makes it cheaper than shares works just as hard on the way down. A deep in-the-money call collects no dividends. A covered call caps the gain in every month a call is sold. Quotes on the screen are delayed midpoints, and real fills can be worse.

That is why the screen is strict, and why most nights the honest answer will be “one or two, or none.” Two out of 300 is the screen working.

Disclosure: Arden K. Vance does not own shares or options in SNDK, MU or any other company named in this note. Educational research only, not investment advice.