When Is Trading Stock Superior To Buying Options?

By Lawrence G. McMillan

The common perception among option traders is that option buying is the “best” approach to a speculative situation because of the great leverage that the calls or puts provide.  But in many cases, ranging from extremely short-term holding periods to ones of more moderate length, where limited stock moves are likely, one may be better served by trading the underlying entity than by buying options.  In this article, we’ll try to answer the question of which is better, an option position or a stock position.  It turns out that the answer may be dependent on what one’s objectives are.  Also, we’ll reconstruct some trading from past recommendations to see the option vs. stock results.

Read the entire When Is Trading Stock Superior To Buying Options? article (published 8/19/13) by subscribing to The Option Strategist Newsletter.