Options Vs. Trading Stocks What's the Difference?

Options Vs. Trading Stocks What's the Difference?

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There’s so many trading types, for example there’s forex, daytrading, crypto, futures, you name it.

It can get confusing at times.

In this video, I’m gonna clearly explain what the difference is between Options trading and stock trading - let’s get into it.

Basic Definition:
Stocks: When you buy stocks, you're purchasing a piece of the company. Essentially, you become a shareholder.
Day-Trading stocks: Buying and selling shares of a company within the same trading day.
Swing trading stocks: Buying and selling shares of a company and holding them for longer than one day.
Options: Options give you the right (but not the obligation) to buy or sell a stock at a predetermined price before a specific date.

Ownership & Control:
Stocks: Owning stocks means you own a fraction of the company.
Options: You don’t own the stock. You only have a contract that allows you to buy or sell it.

Time Frame:
Stocks: You can hold stocks indefinitely (as long as the company is publicly traded). However, whenever people say “daytrading”, they’re referring to buying and selling within the same trading day.
Options: They have an expiration date. If you don’t exercise your option by this date, it becomes worthless.

Risk & Reward:
Stocks: Potential loss is limited to the amount invested.
Options: Potentially higher returns but with increased risk. If an option expires out of the money, you lose your entire investment.
What’s In the money Vs. Out of the money?

Capital Requirement:
Stocks: Requires more capital. You're buying pieces of the company, after all.
To trade stocks you need at least $25,000
The US won’t let you trade unless you have that much inside your account
Options: Typically, less capital intensive. You’re not buying the stock, only the right to.

Leverage:
Stocks: Less leverage. Your potential gain or loss is 1:1 with the stock's movement.
Options: Offers significant leverage. Small price movements in the underlying stock can result in substantial gains or losses.

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Risk Disclosure: http://bit.ly/Risk-Disc

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RISK DISCLAIMER:
The information contained on this video is for informational and educational purposes only. We are not registered as a securities broker-dealer or as investment advisers, either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Trading and investing involves substantial risk. Financial loss, even above the amount invested, is possible. Seek the services of a competent professional person before investing or trading with money.

The information contained on this video, is not provided to any particular individual with a view toward their individual circumstances and nothing in this video should be construed as investment or trading advice. Each individual should assume that all information contained on this site is not trustworthy unless verified by their own independent research.

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Factual statements in this site are made as of the date the information was created and are subject to change without notice.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.