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Showing posts from May, 2017

Why Trade Options

When trading options we can take advantage of three factors that are uniquely available only within options: Leverage Lowering Cost Basis Probability of Profit (POP) Leverage Options give us control of 100 shares of stock, without having to invest the full capital required to purchase 100 shares. When buying stocks, we pay the stock price multiplied by the number of stocks we purchase. For example XYZ company shares are trading at $33.24. If we want to buy 100 shares we need to come with $3324. If we buy call options instead, we pay the option premium, which is currently $4.10, multiplied by 100, for a total investment of $410. Therefore we can control $3324 worth of stocks with a minimum investment of of $410 when we buy call options. Watch this video Lowering Cost Basis Cost basis is basically what we pay for something. There are several strategies used to lower cost basis. One way of doing that is by capping our max potential for profit which in return