Nothing is easier, both derivatives are hard to trade. You should approach them with much broader perspectives as which do you have a deeper understanding in.
Options vs. Futures, what's better?
- Thread starter stv17
- Start date
Do a deep dive into both futures and options for yourself. They are different beasts. Different personalities with different competency levels are going to give different answers. One isn’t “easier” than another - but you have quite a bit of flexibility with options; especially with options spreads. Do the deep dive For yourself and see what suits your own curiosity and risk tolerance threshold.
"What do you guys think is easier (easier to learn, less risk, more profitability etc.) to trade?"
100% Options is harder than futures, there are a ton more variables to learn/watch and the spread/liquidity can be terrible especially in volatile times. But because of it having more options, you can in theory have less risk and more profitability, at least more defined.
"what are the pros and cons of these 2 markets?"
Options:
Biggest pro: options has more options
Biggest con: takes longer to learn, Most don't fully understand it.
Futures:
Biggest Pro: trades 23/hours, markets with 0 spread, highly liquid, simpler
Biggest Con: Not as many options
I personally trade BOTH.
100% Options is harder than futures, there are a ton more variables to learn/watch and the spread/liquidity can be terrible especially in volatile times. But because of it having more options, you can in theory have less risk and more profitability, at least more defined.
"what are the pros and cons of these 2 markets?"
Options:
Biggest pro: options has more options
Biggest con: takes longer to learn, Most don't fully understand it.
Futures:
Biggest Pro: trades 23/hours, markets with 0 spread, highly liquid, simpler
Biggest Con: Not as many options
I personally trade BOTH.
I went through this battle. Currently I trade options on equities but I may eventually switch to futures options when my roll is big enough.
I don't really fully understand futures options but they come with their own pro/con list.
Futures
Pros
* 24/6 market
* Tax advantaged
* Simple - up, down, and spread that's all you can do
* Daytrading margins on majors can be cheaper than an equivalent options trade
* High leverage - could make your day with a few points depending on contract
* Regulated - Currency futures are the better, smarter way to trade Forex.
* Far, far better for the day trader
Cons
* High leverage - brokers (pay attention to brokers here especially) advertise low account balances and low margin requirements in an effort to get you to blow out faster.
* Poor execution at most non-execution brokers
* Limited contracts - You won't always be able to find a play and there aren't a ton of contracts that are good speculating
* Liquidity - there are only a few contracts that are really easy to get into and out of at any time of the day.
* Requires a large account (25k+) to trade anything worth your time (micros are interesting but not where the money is)
Options
Pros
* Nearly infinite configuration of trades available with expirations, greeks, underlyings, etc.
* Extremely liquid options on nearly every major underlying
* Can begin trading with a smaller account and not blow out quickly
* Only limited by your imagination on underlyings
* Great for a "buy and hold" or "swing trader" mentality
* Some trades have definable risk - you can dial in your maximum loss to exactly where you want it to be with a spread
Cons
* Typically far more difficult to get maximum privileges
* Can be just as scammy as futures (TastyTrade, OptionsAlpha, and other charlatans give surface level advice that is good but don't give you the secret sauce)
* Almost impossible to set SL/TP on anything but single contract long/shorts
* Difficult to understand - for example a long call on expiration day may act in a way that is completely unexpected because of theta/delta/vega comingling
* Limited to market hours
* No tax advantages
I don't really fully understand futures options but they come with their own pro/con list.
Futures
Pros
* 24/6 market
* Tax advantaged
* Simple - up, down, and spread that's all you can do
* Daytrading margins on majors can be cheaper than an equivalent options trade
* High leverage - could make your day with a few points depending on contract
* Regulated - Currency futures are the better, smarter way to trade Forex.
* Far, far better for the day trader
Cons
* High leverage - brokers (pay attention to brokers here especially) advertise low account balances and low margin requirements in an effort to get you to blow out faster.
* Poor execution at most non-execution brokers
* Limited contracts - You won't always be able to find a play and there aren't a ton of contracts that are good speculating
* Liquidity - there are only a few contracts that are really easy to get into and out of at any time of the day.
* Requires a large account (25k+) to trade anything worth your time (micros are interesting but not where the money is)
Options
Pros
* Nearly infinite configuration of trades available with expirations, greeks, underlyings, etc.
* Extremely liquid options on nearly every major underlying
* Can begin trading with a smaller account and not blow out quickly
* Only limited by your imagination on underlyings
* Great for a "buy and hold" or "swing trader" mentality
* Some trades have definable risk - you can dial in your maximum loss to exactly where you want it to be with a spread
Cons
* Typically far more difficult to get maximum privileges
* Can be just as scammy as futures (TastyTrade, OptionsAlpha, and other charlatans give surface level advice that is good but don't give you the secret sauce)
* Almost impossible to set SL/TP on anything but single contract long/shorts
* Difficult to understand - for example a long call on expiration day may act in a way that is completely unexpected because of theta/delta/vega comingling
* Limited to market hours
* No tax advantages
Futures is directional bettings only while Options allows neutral composite strategies. When Kospi200 Options was introduced about 20 years ago in Korea, a retailer who retired from the biggest asset management company in Korea grew his half a million fund to 200 millions in 5 years. He said he used strangle Options strategy.
Was he long or short the strangle? How did he adjust if the short strike got hit if he was short?
Sorry I don't know the details. I think he just bet on volatility or something instead of direction... He also said he studied a lot of fundamentals and macro economics. After he made $200M, he quit the trading and bought a local underwear design/manufacturing business. He dreamed to own and run 'real' business he said.
You can also trade spreads in futures.