Stock options trading and stock trading, which is more profitable? This is depend on you are an long term investor or short term investor. Of course, long term investment are more risky because the market is changing like weather and control by the global issues. Let’s find out what are the benefits of stock options trading compare to stock trading :-

1) Stock Options are more Affordability than Stock

Call options allow us to control company stocks that would otherwise be quite expensive to own. Stock Options cost a fraction of the price of the underlying stock but they represent the same amount of shares. So this means with Call Options you can actually profit on the same shares using a much smaller amount of money.

For example if ABC shares were trading at $10 and you chose to buy 100 shares,
your cost =$10 x 100 (shares)= $1,000.
However an ABC Call Option with a strike price of $10 might only cost you $1.
$1000(cost) x $1 = control 1000 of the same shares.

2) Leverage Of Stock Options

With Call Options not only are you able to control more shares, but your profitability would be much greater than buying the actual stocks. With the same amount of money that you would have spent on buying shares, that same amount of money would allow you to control a much bigger amount of that stock through buying its Stock Options. The power to control more shares with lesser money produces leverage.

Let say ABC company stock price gap up from $10 to $11 and your profits is $1

Profit of Buying Shares: $1 x 100 = $100
Profit of Buying Stock Options: $1 x 1000 = $1000

You get 10 times profits from investing in stock options!

If you are an smart investor, is stock options trading would be your ideal choice?