facebookWhat are the pros and cons of options trading vs. equity trading? - Seedly

Gabriel Tham

Tag Team Member at Kenichi Tag Team

30 Jan 2020

Stocks

What are the pros and cons of options trading vs. equity trading?

Does options trading offer better returns, or is it simply a different and equally rewarding strategy? Is there a linear risk/reward model? Is it less risky?

Discussion (2)

What are your thoughts?

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Ernest Yeam Wee Leong

30 Jan 2020

Content Creator at www.youtube.com/c/JustBeingErnest

Options and equity trading has similarities and differences.

Similarities is that both are trading an assets. And both can make one lose or make money.

Differences is for options you are trading a secondary assets that is based on the performance of the primary assets which is the actual stocks.

And for options it require lesser capital then equity trading since for options you do not need to buy upfront and can sell the options if you are in the money.

Options definitely has more strategy to use and makes use of time decay to affect the price of the options.

With options it is like a landlord and tenant relationship. The landlord is the owner of the stocks and tenant is the person who can be a buyer or seller of the options contract. The tenant can be paid by the landlord by selling put options to the landlord. The landlord can also be paid by the tenant by selling call options to the tenant. The "winner" or "loser" will be known when the deadline is up.

These scenarios makes options trading more exciting than equity trading personally to me.

Hope the above helps

I write cool stuff about personal finance and money-saving hacks here.

Option trading,

as well as short term

trading should be discouraged.

on the whole (long term) not

effective.

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