Real Benefit of Options Trading

What is the one real benefit that options trading has over all other forms of trading?

What is Options Trading Good For?

Is options trading good for making millions quickly in speculative trading? Cryptocurrencies has proven to be way more effective and safer than stock options in producing quick millionaires over the past decade (even though not quite so since the crypto-crash begun in 2022). So, is options trading good for long term buy and hold investing? Of course not, stock options EXPIRES in a matter of days or months making long term investment anything but impossible. So, options trading is not good for speculation, neither is it good for long term investment. What then is options trading good for? Why does it still exist if it is outdone by every other investment types out there?

The Real Benefit of Options Trading

You will be surprised to know that there is but ONE thing stock options do better than any other investments out there. Yes, ONE, not TWO, not TEN but just ONE. Yes, in a way it is but a one trick pony but it is one BIG trick. What is that?

That is, only in options trading can you create almost an endless number of options strategies in order to profit from any and every situation in the stock market!

Think the stock is going to go upwards BUT only up to a certain point? Bull Call Spread has you covered! Think the stock is going to remain sideways within a very narrow price band? Short Strangle has you covered! Don't know which way the stock might break out next but you want to profit either way? Long Straddle has you covered! And not to mention the countless variations that you can construct in order to cater to extremely specific situations and to profit from it! Its like stock market Lego! (check out over 100 options strategies in the Options Strategies Library)

This is something you will not find in any other forms of investment!

Try our options strategy finder to find an options strategy suitable for your situation!: Options Strategy Selector.

So, If You Are Buying Call Options or Put Options

Then you are really not trading options at all and in fact engaging only in directional gambling that requires professional level of market analysis skill to get anywhere near being able to ensure long term growth of your capital. In fact, like I said, cryptocurrencies has been far better than stock options in just single directional betting for capital growth, so, why trade options at all? This is not to say that directional call option or put options buying has no place in options trading but that it should not be the ONLY thing you do with options. Directional call or put options compliments your existing options strategies and options positions by helping to add more alpha to your portfolio. However, when you make it the ONLY thing you do, you are asking for trouble if you are not hitting stock pick winning rates of at least 70% and above (meaning at least 7 out of 10 stocks you pick move significantly in the direction that you predicted).

Which Means You Need Quite a Bit of Money For Options

Yes, this means that for options trading to be meaningful, you need to have a significant amount of money to do so. In my opinion, nothing below $30,000 is meaningful in options trading. Because you need to put on options positions in the way of strategies that require either significant cash upfront or significant cash margin. Also taking into consideration money management and risk management means it simply won't work for small fund sizes. In fact, I explained here how Fund Size Affects Options Trading.

Real Benefit of Options Trading - Conclusion

I hope this article clarifies the one true reason why anyone should engage in options trading. If you are not taking full advantage of the full power of options strategies in dramatically increasing your chances of success, then there are actually many other better forms of investments out there.