 Hey everyone in this video lesson. I want to talk to you about the top five reasons to trade options versus stocks First I want to review these five advantages Then we'll jump onto the platform and take a look at a real-life example One reason to trade options versus stocks is leverage You can use much less buying power and achieve very similar results with options versus stocks number two You can take less risk with options options were actually designed to limit or hedge Against risk and you can define the exact amount of risk that you want to take with options before you even place the trade Number three trading stocks is a 50-50 bet no matter what support and resistance lines You use or which technical indicators you think give you an edge Trading stocks outright is a 50-50 bet advantage number four with options. We don't need to focus on market direction We don't have to bet whether the stock is going to go up or down We can make money regardless if it goes up down or trade sideways and number five Options can create a very high winning percentage So not only does that benefit you mentally as a trader, but it also gives you that Consistency those consistent profits so that our profit and loss doesn't look like a roller coaster ride Let's take a look at an example to make this all make sense the example. We'll use here is that of Apple stock It's one of the most widely traded and liquid stocks available at the time of this recording Apple is trading at about $173 per share. So if you were to buy a hundred shares of Apple, it would cost you about $17,300 now, I'm not talking about buying a hundred shares on margin or anything like that I'm talking about buying a hundred shares with no leverage in an IRA or some type of non-margined account Conversely, if you were to buy one in the money call option where it's currently trading $14.60 that one call option would take $1,460 in buying power remember one option Controls 100 shares of stock. So as you can see with options, you're controlling the same amount of stock with far less capital Let's go to the platform to take a look at this example Here's Apple stock and is trading at about $173 per share when you view the analyze tab on the thinkorswim platform What you'll notice right away is that it gives you the probabilities Automatically we like to set up our trading strategies between 30 and 60 days away So at the time of this recording 217 of 2018 is about 43 days away So it's right on our wheelhouse for how we like to place trades and what you'll notice is that the platform Automatically gives you these probabilities so you can see there's about a 52 percent chance that it'll trade below $173 and there's about a 48 percent chance that it'll trade above $173 so basically a 50-50 bet now from a standpoint of risk remember you're putting up $17,300 to buy a hundred shares So theoretically if Apple went to zero you could lose the entire $17,300 but let's take a look if you were to buy that one call option instead of the hundred shares of stock So we'll check on this box down here, and this brings up the 160 call option Which like I said is trading at $14.60 so in this case you would put up $1,460 where you can see that indicated by the teal box here So not only is that the amount of capital required to put on the trade But that's also the max loss that you could incur on this trade So if Apple traded all the way down to zero the most you could ever lose is $1,460 Now these are both bullish positions meaning we would benefit if the stock went up in value Let's take a look at a theoretical increase in value if the stock went from where it is currently trading at about 173 and if it traded up to 180 dollars now with the call option You can see that your profit on this trade would be about six hundred dollars Let's go back to the stock example and see what the difference would be So if the stock traded up to 180 dollars your profit would be about $700 so your gain would be about $700 on the individual stock, but it would be about $600 on the option Let's take a look at what that means from a return on capital So if you're buying the stock your capital required is 17,300 and you get a profit of $700 that gives you a return on capital of 4% now if you bought the call option the capital required was $1,460 your profit was 600 giving you a return on capital of over 41% So that's what we mean when we say options use leverage You can control the same amount of stock with far less buying capital Now don't go out and start buying call options on everything that you think is going to go up There are some disadvantages as well for example the profit on the stock was 700 versus 600 That's the cost of carrying that leverage and also the time decay Involved with buying options the point of this was simply to show you the power of the leverage of using options versus stocks Let's go back to the platform and take a look at one other example So remember what I said before we don't have to pick market direction and we can place trades that are extremely high Probability, this is still the Apple example And as you can see the stock price is still trading at $173 The difference is this is an option strategy that we utilize where we're trading options above the current price and Below the current price and by doing that you can see here at the time of entry we have over an 82% Probability of making money on this trade and with the way that we manage trades We can actually get that winning percentage up over 90% I hope this helps you understand the power of trading options and just to recap the five main reasons that we trade options Versus stocks is leverage. You can take less risk with options trading stocks is a 50-50 bet Number four, you don't need to focus on market direction with options And you can create an extremely high winning percentage if you have any questions at all Feel free to email us at info at navigation trading comm and we'll talk to you again soon. Happy trading