Why trade OPTIONS over STOCKS: concepts and practice
Options give you LEVERAGE that stocks WONT
When it comes to options trading concepts, understanding options from a viewpoint of LEVERAGE is key in regards to why you should be utilizing options over standard stocks when it comes to your day to day trading. One of the most obvious points to be made is that when you trade a contract, you’re trading the equivalent as if you had interest in buying 100 shares of the underlying, giving you a MASSIVE options trading leverage value over your TRADITIONAL share buying without having to keep in all that liquid capital for that play, which in turn gives you the OPTION to leverage your capital much larger than you ever thought possible.
Options give you HEDGING strategies like you’ve NEVER seen
When it comes options, hedging strategies is one of the first things you should be looking at doing when it comes to your options trading over your traditional share plays, or even with a mix of those shares. Similar to the LEVERAGE aspect mentioned earlier, you can use that same LEVERAGE to hedge your positions. For example in regards to options hedging strategies, you could be utilizing the buying of puts on a weaker market day and then in turn, reinvesting that same monies back into your shares or if the underlying drops enough, exercise those shares while profiting off the premium and reducing your overall risk in that position. There are LOTS of exciting ways of which you can hedge and TRADEUI provides some of the best ways to do it with it’s wide arrange of tools.
Options give you SHORT TERM investment for small account
One of the BEST things options can provide you is short term investment for small accounts with potentially LARGE returns on investment, some of of which might seem obscene if you don’t fully grasp the concept of options as a whole. When it comes to trading options, you’re as mentioned using that LEVERAGE to give you a chance to risk minimal capital for a large return. When trading “In the Money” options, you can capitalize on that leverage and scalp your way to relatively high profits!
In the end, options trading concepts and different types of strategies for leverage and hedging for small accounts and larger accounts alike is beneficial to all and should always be part of your trading arsenal when it comes to reasoning on why you should trade options over stocks. It doesn’t mean you should completely stop trading stocks, but to mix this in gives you a lot more buying power than you ever realized!