5 Reasons Why Options Trading Better Than Stock Trading
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Jason Ng
Apr 20, 2013, 9:20:02 AM4/20/13
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Article Title: 5 Reasons Why Options Trading Better Than Stock Trading
Author: Jason Ng
Word Count: 774
Article URL: http://www.isnare.com/?aid=625090&ca=Finances
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=625090
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Options trading has been the centre of much debate of recent years. Is options trading dangerous? Can we go bankrupt on Options Trading? Indeed, options as a form of derivative instrument is far more complex than the stocks that they are written based on and, like a wild stallion, can hurt you if you do not understand how it works and how to use it properly.
This brings us to the topic of this article.
In this article, I shall present 5 reasons why options trading is actually better than stock trading in order to dispel the age old myths of how dangerous options trading is. Let�s remember this: Options trading is dangerous only when you do not understand it.
1) Variable Leverage
The leverage that options trading give you is perhaps the main reason why people gravitate to options trading in the first place. Leverage is the ability to do more with the same amount of money. Trading options allows you to make a lot more profit on the same move on the underlying stock. When you buy the stock itself without margin, you are merely making 1% profit on a 1% move in your favor. However, in options trading, you could be making 10% profit on that same 1% move the stock made or even up to 100% on that same 1% move!
Yes, the beauty of leverage in options trading, unlike in futures trading, is that it is VARIABLE!
Leverage in options trading is variable, you could take on more leverage for more risk or lesser leverage for lesser risk by choosing options of different strike prices and/or expiration month. In general, the more out of the money options, the higher the leverage and the more in the money options, the lower the leverage.
Leverage cuts both ways. This is why the beauty of leverage in options trading is that it allows you to do the same trades with much lesser money, as such, you could simply use only money you can afford to and intend to lose in any failed trade for each options trade so leverage actually help you control your losses instead!
2) Low Capital Requirement
Apple Inc. , AAPL, is trading at $295.36 today which means it takes $29,536 to buy 100 shares today. However, AAPL�s at the money call options costs only something like $715 to control the profits on that same 100 shares of Apple!
3) Bet Downwards Without Margin
In order to profit from a downwards move on a stock in stock trading, you could only short the stock which incurs margin. However, in options trading, all you need to do in order to bet on a stock going downwards is to BUY its put options with no margin needed at all. That�s right, buying put options for profit to downside works exactly the same as buying call options for profit to upside. There is no need to own the stock beforehand and there is no need for margin!
4) Multi-Directional Profits
In stock trading, you only profit when the stock goes in the direction you want it to. Upwards when you buy the stock or downwards when you short the stock. There is no way to profit in both scenarios simultaneously and there is no way to profit if the price of the stock does not move. However, in options trading, such multi-directional profits are possible! There are options strategies that allows you to profit no matter if the stock goes upwards or downwards quickly and there are options strategies that profits even if the price of the stock remains unchanged! Such is the real magic of options strategies which greatly increases your chances of winning in options trading versus stock trading!
5) Play Banker
Sick and tired of always being at the player�s side of the table? In options trading, you could switch instead to the banker�s side of the table and do what market makers do by selling options to people who are wants to take the side of the player! When the players lose, as they often do, you get to keep the bet as profit just like a real banker! Only options trading has the �bet� which you get to keep and it is known as �extrinsic value�.
As you can see by now, options trading is indeed far more powerful and safe than stock trading if you do it correctly. To learn more about what you can do with options, visit our Options Trading website at Optiontradingpedia.com .
About The Author: Jason Ng is the Founder and Chief Option Strategist of Masters 'O' Equity Asset Management and author of http://Optiontradingpedia.com and http://Futurestradingpedia.com.
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=625090
*********************** ARTICLE END ***********************
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Message delivered directly to members of the group:
publish-the...@googlegroups.com
*****************************************************************
Please consider this free-reprint article written by:
Jason Ng
*****************************
IMPORTANT - Publication/Reprint Terms
- You have permission to publish this article electronically in free-only publications such as a website or an ezine as long as the bylines are included.
- You are not allowed to use this article for commercial purposes. The article should only be reprinted in a publicly accessible website and not in a members-only commercial site.
- You are not allowed to post/reprint this article in any sites/publications that contains or supports hate, violence, porn and warez or any indecent and illegal sites/publications.
- You are not allowed to use this article in UCE (Unsolicited Commercial Email) or SPAM. This article MUST be distributed in an opt-in email list only.
- If you distribute this article in an ezine or newsletter, we ask that you send a copy of the newsletter or ezine that contains the article to http://www.isnare.com/eta.php?aid=625090
- If you post this article in a website/forum/blog, ALL links MUST be set to hyperlinks and we ask that you send a copy of the URL where the article is posted to http://www.isnare.com/eta.php?aid=625090
- We request that you ask permission from the author if you want to publish this article in print.
The role of iSnare.com is only to distribute this article as part of its Article Distribution feature ( http://www.isnare.com/distribution.php ). iSnare.com does NOT own this article, please respect the author's copyright and this publication/reprint terms. If you do not agree to any of these terms, please do not reprint or publish this article.
*****************************
Article Title: 5 Reasons Why Options Trading Better Than Stock Trading
Author: Jason Ng
Word Count: 774
Article URL: http://www.isnare.com/?aid=625090&ca=Finances
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=625090
Easy Publish Tool: http://www.isnare.com/html.php?aid=625090
*********************** ARTICLE START ***********************
Options trading has been the centre of much debate of recent years. Is options trading dangerous? Can we go bankrupt on Options Trading? Indeed, options as a form of derivative instrument is far more complex than the stocks that they are written based on and, like a wild stallion, can hurt you if you do not understand how it works and how to use it properly.
This brings us to the topic of this article.
In this article, I shall present 5 reasons why options trading is actually better than stock trading in order to dispel the age old myths of how dangerous options trading is. Let�s remember this: Options trading is dangerous only when you do not understand it.
1) Variable Leverage
The leverage that options trading give you is perhaps the main reason why people gravitate to options trading in the first place. Leverage is the ability to do more with the same amount of money. Trading options allows you to make a lot more profit on the same move on the underlying stock. When you buy the stock itself without margin, you are merely making 1% profit on a 1% move in your favor. However, in options trading, you could be making 10% profit on that same 1% move the stock made or even up to 100% on that same 1% move!
Yes, the beauty of leverage in options trading, unlike in futures trading, is that it is VARIABLE!
Leverage in options trading is variable, you could take on more leverage for more risk or lesser leverage for lesser risk by choosing options of different strike prices and/or expiration month. In general, the more out of the money options, the higher the leverage and the more in the money options, the lower the leverage.
Leverage cuts both ways. This is why the beauty of leverage in options trading is that it allows you to do the same trades with much lesser money, as such, you could simply use only money you can afford to and intend to lose in any failed trade for each options trade so leverage actually help you control your losses instead!
2) Low Capital Requirement
Apple Inc. , AAPL, is trading at $295.36 today which means it takes $29,536 to buy 100 shares today. However, AAPL�s at the money call options costs only something like $715 to control the profits on that same 100 shares of Apple!
3) Bet Downwards Without Margin
In order to profit from a downwards move on a stock in stock trading, you could only short the stock which incurs margin. However, in options trading, all you need to do in order to bet on a stock going downwards is to BUY its put options with no margin needed at all. That�s right, buying put options for profit to downside works exactly the same as buying call options for profit to upside. There is no need to own the stock beforehand and there is no need for margin!
4) Multi-Directional Profits
In stock trading, you only profit when the stock goes in the direction you want it to. Upwards when you buy the stock or downwards when you short the stock. There is no way to profit in both scenarios simultaneously and there is no way to profit if the price of the stock does not move. However, in options trading, such multi-directional profits are possible! There are options strategies that allows you to profit no matter if the stock goes upwards or downwards quickly and there are options strategies that profits even if the price of the stock remains unchanged! Such is the real magic of options strategies which greatly increases your chances of winning in options trading versus stock trading!
5) Play Banker
Sick and tired of always being at the player�s side of the table? In options trading, you could switch instead to the banker�s side of the table and do what market makers do by selling options to people who are wants to take the side of the player! When the players lose, as they often do, you get to keep the bet as profit just like a real banker! Only options trading has the �bet� which you get to keep and it is known as �extrinsic value�.
As you can see by now, options trading is indeed far more powerful and safe than stock trading if you do it correctly. To learn more about what you can do with options, visit our Options Trading website at Optiontradingpedia.com .
About The Author: Jason Ng is the Founder and Chief Option Strategist of Masters 'O' Equity Asset Management and author of http://Optiontradingpedia.com and http://Futurestradingpedia.com.
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=625090
*********************** ARTICLE END ***********************
- To distribute your articles go to http://www.isnare.com/distribution.php
- For more free-reprint articles go to http://www.isnare.com
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