I don't think you want to go out and buy calls for every stock you hear is going to be taken over or rumors floated.
2. NextEra Energy (NYSE: NEE)
Skip Navigation. Markets Pre-Markets U. In this article. VIDEO Options traders have been turning deal chatter into quick profits. Read More Animal health giant Zoetis halted for volatility on takeover report "Right after the stock spiked those calls appreciated dramatically," added Nathan, founder of RiskReversal. Trader makes a huge bet on a Restoration Hardware earnings breakout.
Tyler Bailey. Options traders bet on a washout when GameStop reports earnings. After researching the stocks you wish to invest in — ones that you believe have a growth potential that fits your time horizon — you shouldn't need to obsessively check on them every day.
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Commissions for stock trading vary, but many online brokers have recently eliminated them completely, so shop around before opening an account. Looking for a more tactical approach to investing, one with a smaller investment requirement and flexibility regarding timing or downside risks?
Options may be up your alley. With options, the associated time period for your investment is inherently shorter, making them more appealing to traders who buy and sell regularly. All options contracts have expiration dates, which can range from days to years.
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While many people like the flexibility afforded by options — namely, time to see how a trade plays out and the ability to lock in a price without an obligation to buy — they do add complexity to the investing process. How high or low it will move from its current price.
Options trading requires you to learn a new vocabulary of terms like puts, calls and strike prices, which may lead you to believe these assets are riskier than stocks. That notion may be overstated, especially because investors can let an option expire and incur no further financial obligation other than the premium paid and associated trading costs. For example, buying a put option will help mitigate potential losses if the value of a stock you own goes down.
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Options trading requires a more hands-on approach than investing in stocks. You can set alerts through your online broker. Also, some options strategies are riskier than others, so make sure you understand the trade in advance. Hint: Many experts recommend avoiding daily or weekly options, which tend to be a better fit for more seasoned traders. Another downside of options trading is the related costs, which can be higher than for stocks.
Options vs. Stocks: Which Is Right for You?
Finally, as with stocks, be sure to factor in capital gains taxes. Deciding whether stocks or options are better for you is entirely a personal decision, based on your investing style. Beginner investors and those who prefer simplicity generally will stick to stocks for their straightforward nature.
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Those who favor an active investment approach and love to watch the market may find options appealing. After all, options traders inherently become stock investors if they exercise call options. Meanwhile, many stock traders use put options as a hedging mechanism.
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