Investing in equities affords you many choices, with some being simple and others definitely being exotic and hard to understand. But at each end of the scale you will find that the products are in demand. The reasons for their popularity is the same no matter which equity investment you point to; they can provide excellent returns for those who participate.
Perhaps the most popular of all equity investments are stocks and options, with each having their benefits and drawbacks. And each attracts a certain type of investor with the largest amount trading in stocks. We believe that if an investor understands the real benefits and risks of each, most would realize that trading options is a much better business. Here are the reasons why:
Required Start-up Capital
In terms of what is needed to get started, there is no questions that options take only a fraction of what you would need for a stock account. The idea is to have enough stocks so that you can make a profit as some perform and others do not.
You will want to use this same strategy when purchasing options through a company like Binary.com, but because options only cost a fraction of a stock, your required start-up capital will be much less. In fact buying stocks will sometimes take 75 times the amount of capital needed to purchase options. This will create a difference of at least tens of thousands of dollars to leverage the same amount of stock. Therefore from a start-up capital perspective, purchasing options is superior to purchasing stock.
Diversifying Your Portfolio
Smart investors will tell you that the way to win in equities is to diversify your portfolio. In terms of stocks, this might mean buying them from different sectors or purchasing some blue chip, some growth and even some penny stocks. If you did this you would have a diversified stock portfolio. But what happens if like in 2008, the entire stock market takes a hit and every stock drops double digits? Like many investors during that time, you would be wiped out or at least lose all of your profit requiring years to recover.
When trading options, you can leverage several types of assets that underlie the contract. In addition to stocks you can also buy options for currencies and commodities. So a diversified options portfolio contains stock, currency and commodity options. If one market takes a hit the rest of the portfolio can keep you on track for profitability.
You Can Trade No Matter the Market Conditions
With stocks you need to time everything. Your goal is to find the right stock at the right time. Did you buy it too soon or too late? If so, either will affect your profitability. Is the market in freefall and you want to time when you should get in? You need to have a crystal ball to figure it out.
If you do your homework about how to trade options, you will discover that no matter the market conditions you can still make great profits with options.
Stocks and options can produce great financial gains for investors. However options offer better diversity are cheaper to trade and you can get into the market anytime you want no matter the market conditions. These are all advantages over trading stocks and as a result, options are the better investment choice.