Another side benefit is that a 5% move in an underlying stock can mean far more gains in the options.
Calls and puts are quite different, but most options tradings strategies involve going long either one of those types.
The advanced spread strategies involve going short and long the options.Learning Via ApplicationMovement is the key in any successful options trade. Even for traders options present the risk of losing your cash invested if time passes, but the stock does not move in your direction. You’d be investing a lot less in options, hopefully, so your losses should be about the same they would be if you had just bought the stock.


Options would let you jump into Netflix for a lot less, though you’d have to risk a loss if it does not move enough.If the stock was at $100 and you managed to get $110 calls for cheap, then you would make a lot of money when the stock went to $150.
On the other hand $100 can sometimes get you 10 options contracts, though it would probably take a bit more in practice. The problem with options is that if you don’t call the right timeframe you might lose what you put in.Cisco (CSCO) and Alcatel-Lucent (ALU) were a flat and dying stock, respectively. Options would have been the best way to go, and you can set aside some money to take the long view.
If you are a short-term trader calling 5-10% moves that happen in a day or two options can be great, because weekly and monthly options can be cheap while they are out-of-the-money.


At least with options you are taking a smaller position.Remember, you still get 100% of the gain, like a stock, from the movement of the stock past your strike. Of course throughout the discussion I have ignored the initial cost of the option, which shifts your breakeven point to a different level.
The time value of an option decays, but once it goes in-the-money intrinsic value lasts for as long as the share price stays.



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