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Most investors see options purely as a way to play short-term situations such as takeovers, quarterly earnings reports and other volatility-inspiring situations.

Few long-term investors ever stop to consider options to reflect that sentiment. They’re wrong, because long-term equity anticipation securities, or LEAPS — the industry moniker for such contracts — are often a great alternative to actually buying stock.

There are, however, plenty of things that can happen to a company when you’re holding an option that won’t expire for another 18 months or two years.

The Options Forum this week tackles the issue of LEAPS and what effect stock splits and spinoffs have on the options.

For an answer to this reader’s question, we turned to the helpful call-center staff at the Options Industry Council.

(And remember, we’re always open to reader questions, so drop a note to Options Forum and include your full name.)

I am a neophyte options player. This seems like a good time to buy LEAPS or shorter-term calls on several tech and communications stocks, especially. Could you tell me if I purchase a LEAP and the stock either splits or spins off another company, would the combined values be considered at settlement?

Also, do LEAPS offer the same freedom to settle any time before the close date?

— Gene Romero

While each situation can be different, it is safe to assume that existing option contracts, LEAPS included, will be adjusted so that an option holder’s potential equity would not be diluted due to the spinoff or stock split, according to the Options Industry Council.

According to the hallowed guide, Characteristics and Risks of Standardized Options. As a general rule, stock dividends, stock distributions and stock splits can result in an adjustment in the number of underlying shares or the exercise price, or both.

For example, an investor bought an XYZ 60 option — either a call or a put — and XYZ Corp. subsequently effected a 3-for-2 stock distribution. Instead of covering 100 shares like most standard options contracts of stock at an exercise price of $60 a share, each outstanding option could be adjusted to cover 150 shares at an exercise price of $40 per share.

However, when a stock distribution results in the issuance of one or more whole shares of stock for each outstanding share, such as a 2-for-1 stock split, as a general rule the number of underlying shares is not adjusted. Instead, the number of outstanding options is proportionately increased and the exercise price (or strike price) is proportionately decreased.

For example, if before a 2-for-1 stock split, an investor held an option on 100 shares of XYZ stock with an exercise price of $60, after the split he would own two XYZ options, each on 100 shares and with an exercise price of $30. An adjustment panel may make an exception to the general rule to adjust for stock dividends.

As a general rule, adjustments in exercise prices are rounded to the nearest 1/8 of a dollar, and adjustments in the number of underlying shares are rounded down to eliminate fractional shares. In the latter case, the exercise price may be further adjusted to compensate for the elimination of the fractional shares.

If XYZ spins off its subsidiary ABC by distributing to its stockholders one share of ABC stock for every five shares of XYZ stock, outstanding XYZ options might be adjusted to deliver 100 shares of XYZ stock and 20 shares of ABC stock at the original strike price.

You can be proactive and take steps to locate information regarding adjusted option contracts, including LEAPS due to splits, mergers and spinoffs.

First, sign up with the Options Industry Council automated email system; click on Trading Desk, select E-Mail Alerts and fill out the form.

Second, if you are unsure whether an option has been adjusted, you can visit the stock split, spinoffs and mergers area on the Options Industry Council Web site ; click on Trading Desk and select Information Memos (This is also a great place to learn about previous adjustments due to splits, spinoffs and mergers.)

Third, always check with your brokerage firm before placing the option trade.

If the spinoff or split information is not available at the Options Industry Council Web site, it will be posted as soon as the Options Clearing Corporation receives all the facts. Generally, a definitive adjustment determination will be announced as soon as practical after all pertinent facts become available.