Stocks vs Options

If the stock is 30, and the 27 calls are near a 100 delta and cost around $3.00, I've the same upside but on the downside I can only lose $3. On Shortside, it is the same thing and I avoid short stock fees and I can do it in a cash account or margin account with a much smaller margin requirement. I can buy the 33 puts or whatever works.
 
rmorse said:
If the stock is 30, and the 27 calls are near a 100 delta and cost around $3.00, I've the same upside but on the downside I can only lose $3. On Shortside, it is the same thing and I avoid short stock fees and I can do it in a cash account or margin account with a much smaller margin requirement. I can buy the 33 puts or whatever works.
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  • INTC
  • 1000 shares x $33.17 = $33,170
  • 10 INTC Nov20 30.00 calls at $3.30 = $3,300

Is that a good comparison - the 1000 shares to 10 option contracts? I don't think so but I can't quite put my finger on it yet.






:)
 
OTM-Options said:
  • INTC
  • 1000 shares x $33.17 = $33,170
  • 10 INTC Nov20 30.00 calls at $3.30 = $3,300
Is that a good comparison - the 1000 shares to 10 option contracts? I don't think so but I can't quite put my finger on it yet.


Yes. Less risk, better use of margin. There will be a small cost however because you won't be able to buy the options at parity. You will have to pay a little bit over. Nothing is free.



:)
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IMO ...... The risk of Stock vs Options has to be compared in the amount needed to open the position - not the value of the underlying.



Which is more risky - 1 or 2?
  1. 100 INTC shares x $33.17 = $3,317
  2. 10 INTC Nov20 30.00 calls at $3.30 = $3,300
I would say #2 is far riskier than #1.




:)
 
I'm not sure what you mean. This example is comparing 100 shares to 1000 delta. You have to user your 1st example. The Reg t requirement for the stock is 50% overnight or $16,585. The PM requirement without extra house rules is 15% or $4975.50. Each margin requirement is higher than the cost of the call. And, that math is really not relevant unless you are calculating return on margin used. You are responsible for all losses, not just margin. The long call or long put will have less risk 100% of the time. That does not mean it is the better trade, just that it has less risk.

Sorry...I don't agree with you.
 
After all, options can be used to bet on the direction of a stock's price, just like the stock itself. However, options have different characteristics than stocks, and there is a lot of terminology beginning option traders must learn.
 
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