Why trade Options?

Key points regarding Options:

• Options are a right to purchase an equity or ETF at a particular price in the future, and they always have an expiration date.
• Trading Options enables you to create a profitable long-term portfolio by letting your profits run and cutting your losses short.
• With Options, your profit potential is greater – you can lock-in more profit. Plus, it gives you much more buffer on the downside. The market can drop, and you'll still make money.

Why trade Options? Glenn Neely summarizes the 4 advantages:

1. It costs less to buy an Option (which represents 100 shares of stock) than to own 100 shares of stock.
2. That lower cost provides leverage (a $90 strike Call on a $100 stock will cost about $1,000 to buy as opposed to $10,000 to acquire 100 shares) similar to Futures trading without the same risk exposure.
3. When you create Option spreads (Shorting a Call against a Long Call), you collect premium from the passage of time! This is akin to collecting rent on an apartment building each month.
4. Option spreads reduce the cost of your investment by 25% to 35% while simultaneously increasing the odds of a profitable outcome by 100% to 200%!