Have you ever wondered if options are better then just holding stocks, well you came to the right place. Before we get to which one is better, let’s learn a little more about options and stocks. Then you will be able to see which one is better for yourself.

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OPTIONS

If you want to know the big idea behind options it’s simple. Options are the right to a stock, pretty much a certificate of ownership. Calls and Puts are both classified as options, and can be used for when a stock goes up and down.

Call options

“Calls” are a type of option investors use to make profit for a stock to go up dramatically. Calls are known to make people very rich or loose a lot of money.

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Put options

A “Put” is an option investors use in order to make money for a stock to crash and burn or simply go down. Just like Calls, Puts can be very lucrative if dramatic changes occur in your favor.

Cons

Options are super risky and can be addictive. Options are almost, if not equivalent to gambling. A lot of times you see investors promoting options because of the high reward, but they don’t present the fact that they have to pay a large some of money in taxes after those earning. Usually taxes for short term gains are between 15 to 24 percent

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STOCKS

Stocks are simply publicly traded companies open for investors. The symbols on the stock market or abbreviation for each company is called the ticker symbol.

Compound Interest

Have you ever heard slow and steady wins the race, this can relate to investing as well. Unlike options, when you hold stock in a company you have the opportunity to take advantage of compounding interest. Companies like Disney or Bank of America, hand out a dividend for their shareholders. When you as an investor reinvest the dividends back into those companies your generating compound interest.

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Capital

As you gain a large sum of capital or money over the years in shares, your also able to borrow from yourself by putting your shares up as collateral. Loans can be used as a tax benefit for you but don’t go crazy, you won’t really need to take loans against yourself to avoid paying taxes since you only pay taxes on dividends or when you sell a stock.

Also the only reason you would have to sell a stock is if the P/E ratio has gone over 15 and estimated earning have far exceed actual earnings for a few fiscal quarters, these results usually happen when there are changes occurring in head leadership so beware.

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