Hey Veeky Forums. Which one do you prefer and why? I'll go first.
I like Futures because it's relatively easy to understand compare to options. It's basically like a leveraged stock market buy or short. I just day trade this with some technical indicators.
Btw, if I'm wrong, I would love to learn more about both. I don't know too much about options.
>I don't know too much about options
You apparently don't know too much about futures either.
What do you mean? Futures you trade Commodities using contracts. The mindset is essentially the same where you can buy low, sell high, or short high, close low. The only difference is that while a stock you all can only you lose 100% of what you've invested in maximum, you can lose an unlimited amount with futures. So therefore the risk is potentially greater.
Feel free to add on to this
the principles behind options are relatively easy
the person who sells the option is short. they get a premium up front and that's it. the person who buys the option is long. they pay up front and then have the option to exercise the contract (which they will only do if the strike price is in their favour).
you have call options (long has the right to buy at strike price) and put options (long has the right to sell at strike price) and each has a party on short and a party on long, which leaves you with four basic scenarios you can find yourself in (long call, short call, long put, short put; image related).
of those the long positons are "safe", ie you have a chance of limited loss (the premium) but unlimited gain while the short positions are "risky" with a chance at limited gain (the premium) but unlimited loss.
then read up on the vital difference between european and american options and you're pretty much good to go as far as basic theory goes.
Huh, interesting, so it all boils down to you think its going to go at a price point, select that option (call or put), make sure you choose a far enough expiration and good delta (0.5 and above), then wait until its around your price point and close the trade?
Correct if I'm wrong. Also, thanks for the detailed explanation :)
options are good, if you're long stock you can sell calls with a high strike to collect premium
>wait until its around your price point and close the trade
pretty much ya. you're good to go bro don't bother learning anything else
>get option close to or at strike price in the direction of choice.
>Wait to go PAST your strike price.
>keep until it starts turning or you're good
>profit
Its a little more intricate than that, but basically it.
Protip: trades within first 30 BEFORE expiration makes money. There's a heavy dropoff the closer to expiration you are, and you lose everything at expiration.
Fuck off back to /b/
You can also go further with options in that you can combine them into spreads. So for example you can do a vertical spread where you combine a short and long option together.
Take a vertical put credit spread. You sell a short put and a long put below and still collect a credit. Your gains are capped but so are your losses and it is a high probability trade.
If you only buy and sell stock you only ever have a 50:50 chance. With options you can increase that.
But obviously no one ever limits themselves to just one thing. You use all the tools at your disposal. Stocks, options, futures, everything.
Both are derivates, you can use them hedge your position or as a speculation tool.
You can leverage positions which means results in higher potential profits and loses.
Personally I'm not a big fan of using them, I prefer just buying stocks. Long put or calls have their purpose though, if you want to hedge your portfolio against a potential crash while still being exposed to upside risk for a small premium.
Options are halal.
Futures are haram.
One big difference between futures and options is that futures will always move with the value of the underlying asset which is NOT the case with options
Yeah, because of that, I think that futures are easier to get into than options,
Lot's of futures contracts have options too.
you're a fucking idiot too. read about volatility premium shithead you're gonna lose all your money hold options to exercise them. you fuck off back to /mlp/
Options on futures??? Da fuk does that work?
>You sell a short put
>Still collect a credit
Why are you here explaining options again?
They've been around for quite a while as far as I know. Gives you some great extra dynamics when trading futures. Like adding a theta component.
Why not? A lot of people here are interested in trading, including me, and options give you some very powerful control over just trading stocks alone. I couldn't imagine trying to trade stocks without using options.
you know futures expire right
Yeah, but if you day trade futures away from the expiration day, you should be ok. It's dumb to hold futures.
I never really understood the Greek symbols for options. I know what Delta is, but can someone explain the rest? Sorry, still learning :)
Well it's easier to just look it up for a full and precise explanation but for a quick version:
Delta: The amount the value of an option changes compared to the movement of the underlying.
Gamma: The speed of the change in the delta
Theta: The amount the value of an option changes over time.
Vega: The sensitivity of an option to a change in volatility of the underlying.
There's a whole bunch of others as well like third order greeks but they're not so important unless you're managing massive amounts of money and even tiny movements in your delta and gamma can have large effects.
Those four are the key ones. And vega isn't actually a greek letter but hey, no ones judging
You would have to be full retard to ever actually exercise calls or puts you're holding, when it is exponentially more profitable to just sell them to close out the position.
Unless you're doing covered calls, there is no need to ever actually own the underlying stock. That's why using options to hedge is also full retard, because it is extremely less efficient than strictly opening and closing call and put positions.
Keep it simple and efficient, and repeat the process to infinity.
Well it depends on what you're doing in the marketplace. If you are looking to acquire stock in large amounts and at various price points and you want to do it over time and reduce cost basis at the same time then a strategy like laddered puts would be useful. You sell puts out in various time frames and at different price points.
But yes, if all you're looking to do is speculate in the marketplace then options provide a much better way of doing that. If your assumption is correct you make money, if not you move onto the next trade rather than end up holding the bag and tying up your capital in stock.