What is Better? Buying Call Options vs Buying Stocks ☝

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Buying a call option versus buying stock. http://www.financial-spread-betting.com/ PLEASE LIKE AND SHARE THIS VIDEO SO WE CAN DO MORE! This is a call options course with a series of videos on options trading. Let's examine an example of buying a call options and then let's compare this to buying the actual stock.

What is Better? Options vs Stocks; which is more profitable
Imagine you have company XYZ which is trading at $50

1) Buying a call option
We also have a $50 call option which is trading at $5
In this example we'll be using at-the-money call option..
Buy 1 call at $5 which is going to cost us $500 (1 option contract gives us the right to buy 100 shares so $5 x 100 shares). That is the total risk on the trade - that is one of the advantage of buying a call option. You can never lose more than this which is appealing. The downside is that the value of this call option will decay over time. This means you need to have the timing right.

2) Buying the actual stock
Alternatively you could buy 100 shares at $50 which would cost you $5000. If company XYZ's stock price went to 0 our total loss would be $5000.

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