Why Options Trading Is Better Than
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Why Options Trading Is Better Than Stock Trading - Ebele Kemery PowerPoint PPT Presentation


Here you will get 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.

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Why options trading is better than stock trading ebele kemery

Why Options Trading Is Better Than

Stock Trading - Ebele Kemery

Options trading has been the centre of much debate of recent years. Is it dangerous?

Can we go bankrupt? 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.

Here you will get 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 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, unlike in futures trading, is that it 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!


Why options trading is better than stock trading ebele kemery

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 those 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!


Why options trading is better than stock trading ebele kemery

Only options trading has the "bet" which you get to keep and it is known as "extrinsic

value".

Ebele Kemery associated with JPMorgan Asset Management is also a member of the

Global Fixed Income, Currency & Commodities (GFICC) Group. Based in

New York, Ebele is the head of Energy Investing within the Commodities team. Prior

to this role, she provided institutional client relationship management and tailored

risk management solutions in the Investment Bank’s Global Commodities Group.

For more details please visit: http://ebelekemery.blogspot.com/


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