Options are more expensive, both in commish and bid/ask. Trading options is a very costly way to get leverage for a directional bet.
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Short Selling Fees
- Thread starter cutetrader
- Start date
Sure, and you trade those stocks because they move. They move because they are relatively small and illiquid. Why not have your cake and eat it too? The leverage of options makes relatively placid stocks with great liquidity move sufficient to trade. This is the proper use of leverage, not to shatter your money management and get bigger, but to make viable trades out of smaller movements rather than sit there waiting for a setup. (no offense, I don't have an animus against stock traders)
This might work for larger priced stocks like AAPL or more liquid ones like SPY where the movement of option corresponds with the stock movement most of the time.
For lower priced stocks or the ones with wide bid/ask spread, the option price really does not change as it does for SPY. This makes it bit hard to make profit from a trade.
Also the commissions are expensive too.
Hello everyone, I also messaged to the IB regarding how they calculate the fees. Every one here told me I need to use the Fee Rate but they said IB uses rebate rate.
This might work for larger priced stocks like AAPL or more liquid ones like SPY where the movement of option corresponds with the stock movement most of the time.
For lower priced stocks or the ones with wide bid/ask spread, the option price really does not change as it does for SPY. This makes it bit hard to make profit from a trade.
Also the commissions are expensive too.
Provided you trade a deep in the money option, you can get the approximate movement of the underlying. You are absolutely right about the spreads. However, that's kind of a chicken vs. egg argument. The reason we trade these low priced stocks is they really move. However, the leverage offered with options means we can trade slow moving underlying stocks, because the leverage exaggerates the moves. Unless there's something really unique that makes one want to trade the lower priced stocks, I have to believe options offer a better opportunity.