Stocks Versus Options Costs

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• Stocks versus Options costs

• Comparing Stocks versus Options
• Author Hari Swaminathan

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About OptionTiger

• Many traders and investors may not fully
  understand the capital benefits when you compare
  Stocks versus Options. If youre new to Options,
  one of the first features you should understand
  is that Options can be very cost-effective to
  implement your outlook for a stock. In this
  example, lets look at a stock Caterpillar (CAT).
  In this example, were going to compare Stocks
  versus Options costs strictly from a cost point
  of view.
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• CAT is trading around 80 today. To buy 100
  shares, youd have to spend about 8000 or if you
  have a margin account, then you pay half that
  amount 4000.
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• If you were to buy an At-the-money (ATM) Option
  in the Dec series, the equivalent of the same 100
  shares would cost about 250.

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About OptionTiger

• As you can see, this is very cost-effective. Of
  course, when you buy Options, there are other
  considerations like time decay and Implied
  Volatility, but this video is a simple example to
  illustrate the cost advantages of buying an
  option versus the stock itself.
• But you must bear in mind Options have many
  moving parts, and a newcomer is well-advised to
  learn Options and how they work, both from a
  theoretical and practical standpoint before you
  invest large sums of money. Options lose value
  over time, whereas the Stock is present forever.
  However, if you choose an Option that is far out
  in time, it is less likely to lose value due to
  time decay, and can act as a very decent
  substitute for buying the stock at the fraction
  of the costs of buying the stock itself.

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About OptionTiger
This video highlights some of these concepts in a
practical environment.
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