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about Trading The Gap – Stock Trading Course
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Here’s How options trading works in comparison to traditional stock trading…
When you trade on the options market, you’re getting huge % returns for a much smaller capital investment.
Let’s say you want to trade Amazon stock because you felt it was going to make a big move up on the market. (something I show you how to spot and analyze in video #13).
So, on the traditional stock market, you’d purchase 100 shares of Amazon stock. Let’s say each share is trading at $1,790. So, 100 shares would cost you $179,000.
Not let’s assume the stock goes up $15.00 a share. Since you invested $179,000 in Amazon Stock and purchased 100 shares, you would have made $1500 on that trade. (100 x $15 = $1500).
That’s great profit on that trade.
Now let’s look at this same scenario but if you were trading options instead….
An option gives you the “right” to trade that stock but not the “obligation”.
Let’s say you can buy an option to buy shares of Amazon for $.65 cents each. Each option contract equals 100 shares of stock, so 10 contracts would control 1000 shares of Amazon.
The cost to purchase these options?
$650. YES! You read that correctly. Just $650 gives you full buying rights to purchase 1000 shares of Amazon stock that would normally cost you $179,000 for those same 1000 shares the traditional way ($.65 x 100 shares = $650).
Pretty amazing right?
Now sticking to the same scenario, let’s assume after you purchase your 100 options of Amazon Stock (1000 shares) the stock goes up in price by $15.00 and the option goes up to $1.85.
Your profit on this option would be $1.20. And since you own 1000 shares of this stock option, your entire profit on this trade would be $1200.
You invested $650 in the trade and earned $1200.
In trading the traditional market, you would have needed to risk $179,000 to make that kind of trade with Amazon Stock. But with Options Trading, you only need to risk $650 for almost the same profit.
Are you getting excited? Do you see why Options Trading can be such a low risk, high reward trading system. We go over options trading education in depth in my Trading the Gap Stock Training Program.
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