The May issue of FUTURES magazine came yesterday and an options article began with: "Market prices for options are rigidly structured by computer models. An option trader may have opinions about on th proper buying and selling price, but ultimately the price will be placed close to an option price curve that is the result of time-tested mathematical formulas based on the probabilities of future price variations." Now I'd have my doubts about that if I read that on an ET bulletin board but I'd never disbelieve FUTURES magazine Re the OP's initial question about pitfalls of LEAPS, FWIW, when they were first introduced way back when, I used them for diagonals. At that time they appeared underpricced. Or more likely, they were using a steeper option pricing curve so the horizontal skew was greater. In general, because that difference is less now, IMO, a 6-9 month long leg is more suitable for a diagonal because even if you pay a little more per day vis a vis time decay, you'll lose a lot less if the position tanks and drives the position toward parity. It's a risk/reward thing.