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Trading Stock Options - Why Smart Day Traders Choose Options Instead
Submitted By: SB Wise Date: January 21, 2010, 07:34:01 PM Views: 1117
Summary: Cheap stock trading may seem like a great idea until you realize the rewards are paltry compared to the level of risk involved. Long time investors have known for some time that investing in the equities market is a woefully inefficient means of deploying capital. The notion is that the free reign of day traders in the equities market are over - and have been for some time.

Cheap stock trading may seem like a great idea until you realize the rewards are paltry compared to the level of risk involved. Long time investors have known for some time that investing in the equities market is a woefully inefficient means of deploying capital. The notion is that the free reign of day traders in the equities market are over - and have been for some time.

Day Traders Not Fooled by the Media Hype
What we see in the capital markets today is a preponderance of the individual day traders' activity is concentrated in more leveraged forms of investing such as options and forex. People new to the market may be attracted to the cheap stock trading ads seen on the media, television, etc., but the real action and money is being made elsewhere.

Why Cheap Stock Trading Is Out and Options Are In
It may seem like a great idea to take a little bit of the family nest egg to dabble in the equities market but what small timers quickly find out is that they have too little capital to invest. Having to little money to begin with makes earning a decent return on investment in the equities market difficult for the long term investor, and all but impossible for the day trader.

Why option and forex traders fare better is because those markets allow the amplification of gains via leverage. Basically a person with only a thousand dollars to work with can invest as though they had $10,000 or even $100,000 or more to invest. A 3% gain becomes 30% or 300% accordingly. The downside is that losses are equally amplified (max out at 100% for most small timers though).

Some traders who have limited capital and are unable to get access to standard options try the low minimum capital binary options market instead.

See more about both types of options at our free options trading tutorial.

Steve Wise

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