| Options offer leverage and a chance to make big percentage gains in a relatively short amount of time. Because options have lower prices than the underlying stock, their percentage movements tend to be much greater. A $1 move in a $50 stock is only a 2% move. But in a $2 option, a $1 move is a 50% difference.
In addition, with the same amount of money, you can buy more options than you could buy stocks. It's no surprise then that options are popular for aggressive traders looking to maximize gains.
Of course, on the flip side, if you are wrong and the stock moves against you, the option will lose more in percentage terms. It can even fall to zero. Thus, leverage can work for or against you. However, losing a bigger percentage doesn't mean losing more money. This is because when you buy an option, you usually invest a smaller amount unless you really want to go for a home run. Continue reading... HERE
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