Stock Trading vs Options Trading

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Stock Trading vs Options Trading, which is better for you?
To get the transcript and MP3, go to: https://www.rockwelltrading.com/coffee-with-markus/stock-trading-vs-options-trading/

Intro: 0:00
Overview: 0:42
INSW Trade Example: 1:32
TVTY Trade Example: 6:28

Stocks vs Options, which is better? Which should you trade?

This is what we’re going to talk about and I’ll show you real examples.

I will be using an account size of $20,000 as an example.

On an account of $20K we only want to risk 2% = $400

We want to look at risk, reward, the risk/reward ratio & the buying power needed.

The buying power is the amount in your account needed to reserve for this trade, it is NOT the risk.

What is risk reward ratio in trading? Let’s look at an example.

INSW:
This stock came up this morning on the PowerX Optimizer as a buy. Based on a $20K account, the idea is to buy 240 shares at 22.84.

For the Stocks:
– Stop-loss is 1.67.
– Trading 240 shares.
– Risk per 1 share = 1.67 = $401 total
– Looking for a reward of 8.62 per share = $2,069
– Risk/reward = 1:5.2
– Buying Power needed: $5,482

For the Options:
– For ITM 22.50 call option, you risk $172 per option.
– We can risk buying 2 options
– For 2 options we would risk $344
– Reward: $1,360
– Risk/Reward: 1:4
– Buying Power needed: ONLY $440

TVTY:
For the Stocks:
– Trading 400 shares
– Risk per 1 share = $1.02 = $408 total
– Looking for a reward of 5.61 per share = $2,248
– Risk/reward = 1:5.5
– Buying Power needed: $4,520

For the Options:
– For 12.50 call option, you risk $141 per option.
– We can risk buying 3 options
– For 3 options we would risk $423
– Reward: $1,332
– Risk/Reward: 1:3.2
– Buying Power needed: ONLY $750

**BUYING POWER is not the RISK. It is money being reserved for the trade**

When you trade a retirement account, you can’t leverage the money that you have in the account and you can’t short stocks.

Is it better to trade stocks or options?

Long story short, often for smaller accounts, since you use less buying power, it makes more sense to trade options.

Recommended Videos – options training for beginners:
The PowerX Strategy Playlist: https://youtube.com/playlist?list=PLBa3sAx-Io2l9ZV4s66J-uNkG6AJvhSPB
The Options Wheel Strategy Playlist: https://www.youtube.com/playlist?list=PLBa3sAx-Io2nosgosERUhIZwzvIgD-3Vq
Options 101 Playlist: https://www.youtube.com/playlist?list=PLBa3sAx-Io2m6vWuLNRz4HHUErjO8H6N8
Options Income Trading Strategies: https://youtube.com/playlist?list=PLBa3sAx-Io2mybLLdWtbjTFqK9-BR5SJb
The 5 Biggest Mistakes New Traders Make: https://youtu.be/DY_0lq_LdQc
Generating SRC Profits – Here’s How To Do It: https://youtu.be/FP2x4JULzwU

#OptionsTrading #StocksVsOptions # OptionsTradingExplained
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Comments

Markus Heitkoetter says:

Do you prefer trading Stocks or Trading Options? Let me know in the comments.

Recommended Videos:

The PowerX Strategy Playlist: https://youtube.com/playlist?list=PLBa3sAx-Io2l9ZV4s66J-uNkG6AJvhSPB

The Options Wheel Strategy Playlist: https://www.youtube.com/playlist?list=PLBa3sAx-Io2nosgosERUhIZwzvIgD-3Vq

Options 101 Playlist: https://www.youtube.com/playlist?list=PLBa3sAx-Io2m6vWuLNRz4HHUErjO8H6N8

Options Income Trading Strategies: https://youtube.com/playlist?list=PLBa3sAx-Io2mybLLdWtbjTFqK9-BR5SJb

The 5 Biggest Mistakes New Traders Make: https://youtu.be/DY_0lq_LdQc

Generating SRC Profits – Here's How To Do It: https://youtu.be/FP2x4JULzwU

mxer b says:

Switched to options. More ways to get out of bad trades and more flexibility appeals to me instead of hoping that the stock you picked goes up. Plus it feels like more of a strategy and a game

Thanks for your videos they helped clear up a lot of questions.

Nathan John says:

Vielen Dank für dieses wundervolle Video. Ich habe beschlossen, Ihre Muttersprache einzugeben, um meine Wertschätzung für Sie zu zeigen.

Panda Panda says:

Brilliant as always.
Thanks

Monjur Karim says:

Nice video, as always. thank you. how is the holiday so far at Florida ? Hope you get back home safely. I have a question, in TD if I would like to allocate certain amount of money for doing trading only and to monitor the day to day progress, is it possible? I know that they don't have the option to make sub account like IB. But can it be done using a group or any other thing ? so one group for investment, one for options and perhaps one for trading !! If it is doable, will it be worth for you to make a training video on it ? thank you

dmac80 says:

Still learning as a new active investor, you're teaching style is great.

GuitarHead says:

Super, thank you a million 👍👍👍 I was also watching your video on pmcc

Chuck G says:

But with options, doesn’t require you to watch your account all the time? I’m in the military so it’s very difficult for me to watch my phone all day. Please help because I’m really struggling right now with trading.

JC says:

2.5 x 3 is 7.50 in my neck of the woods. Am I missing something. Where do you get 750 from. Thanks
I no nothing about options so pardon my ignorance. Thanks

MMMILO99 says:

Markus thank you. Great videos! I have been doing the wheel for the last two months. I am working with a 10k account, and making about $1500 a month. Thank you! Question… what program do you use to chart stock? It doesn’t look like tasty. Also how can I get (purchase) your wheel stock optimizer?

Bill Assim says:

Very good video,.

danny franklin says:

I have a cash account of $19000.00 would I be better off getting a margin account?

Jarrell Pyro Johnson says:

I don't understand how to calculate the risk and know how much buying power that equates to

Joseph Derleth says:

How do you choose the expiration date of the option?

Haney GuitarInstruction says:

My account size is 25 thousand at the moment. How big should I grow it in order to quit my job and trade for a living. I'm thinking at least 400 thousand. That's going to take at least 10 years.

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