Options Basics: Why Option Investment?

Why option investment? Why not invest in stocks directly?

The main obstacle of stock investment is the large amount of capital needed. For example, the current Apple share price is $199.83. One hundred apple shares will cost around $20,000, which is beyond the ability of many investors.

On the contrary, option investment is perfect for people with limited capital. The premium of AAPL Jan 2008 200 call option is $9.00. One such a call option will requires only $900. As share price goes up to above $200, the intrinsic value of your call option increases and so does the value of your call option.

Another advantage of option investment is the possibility of gaining a high return in a short period of time. In my blog "Interesting trading experience in China!", I have shown you two option investments that gives me 100% over return in just 2 days.

In sum, option investment gives those investors who have limited capital more opportunities in investment.

Posts that discuss options basics:
What's Stock Option?
Premium, Intrinsic Value and Time Value
Option Investment, How it Works?
Why Option Investment?
What's the risk?