Options vs. Options Spreads: How To Minimize Your Risk

By: Nic Chahine

Investing in options is better than investing in stocks.
Today's post will show how there is an even better way of trading options. Consider this article to be part two of a three part series; the third part will follow in the coming days.

Even though investing in options provides a better bang for buck, one can immediately look for ways of perfecting the craft.

The Problem
The enemy of long options positions is time! All else held equal, out of the money long options positions will decay to zero and cause buyers a complete loss.

Example: a trader buys a September 500 put in Apple (NASDAQ: AAPL) for $8.80 per contract. If Apple is over 500 on the expiration day (September 21), then the trader loses the entire $8.80, which is 880 per contract. Continue reading "Options vs. Options Spreads: How To Minimize Your Risk"