Question

here are two perspectives about this subject; first, some investors/traders believe that stock is better because it gives you a small piece of ownership in a company. stocks fans believe that buying stocks can be a good investment and it's beneficial for the long term. On the other hand, some people believe that options trading can be little bit riskier but more beneficial compared to stocks. Some financial experts suggest trading options because they require less financial commitment than equities. I think both stocks and options have their advantages and disadvantages; but I pick the stocks over the options because my perspective is long term, besides I feel like investing in stocks is less stressful. What do you guys think?

Answer 1

I think investment in stock is providing the investor with an opportunity of making a higher rate of return for the longer period of time because investment in stock is also offering with the payment of dividend by the company and it is also offering with very high universe of different stocks which can be adopted for investment in the longer period of time and they can be adopted for investment in different proportion in the portfolio as well so portfolio management is always dependent upon cash stock not future options.

Options will only provide you with the right of investing in the short period of time because they will have a maturity and this maturity is deadline for exercising of the option if the option is exercised also, options do have a flexibility of having both put option and the call option and having a mix of different strategies but they are often representing trading rather than investing and hence options can only be preferred for the short period of time in order to make a rate of return which is more about short time exit and entry after technical analysis.

I am more focused towards fundamental analysis of stocks in the longer period of time and I always invest for a longer time frame because there is no deadline of achieving of intrinsic valuation by various companies as this company can provide with excessive rate of return in very short amount of time so it is very rational to keep the stocks as investment for the longer period of time in order to maximize the rate of return rather than investing into options which will only provide you with the right to exercise with a short span of time as it has got its maturity period attached with it so and investors looking to invest for long period of time will always be selecting stocks over options.