Earlier this week, we discussed the pros and cons of trading Long-term Equity AnticiPation Securities, otherwise known as LEAPS, in the latest edition of Options 101. In today's edition of Advanced Options, we're going to continue that theme by breaking down a hypothetical long call spread with LEAPS.

Let's pretend that our friend John has high hopes for the energy sector, and has honed in on the Energy Select Sector SPDR (NYSE: XLE) exchange-traded fund (ETF). At last check, the XLE was flirting with the $50 level; John thinks it will slowly and steadily surmount the $55 level during the next couple of years, but doesn't want to risk purchasing a single long call. With this in mind, John decides to initiate a long call spread on XLE using LEAPS.

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