But with options, the profits and losses become very final very quickly. The most reliable way to make money in the stock market is boring, boring, boring. Get the general idea? No idea why you think arbitrage would somehow change this. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. So you can use options to hedge and thereby prevent losses, but you also blunt your gains. With an ITM option, your intrinsic value is not bleeding out at all. HAVE to understand how to evaluate projected option price movements if you have software that does that for you. Then moderating the choice based on risk tolerance. That best way is to buy a dividend paying security, never sell it, and reinvest the dividends. Same thing but starting with a 98 call.
Try these techniques in simulation before diving in! Check those commission rates in your analysis as well. So few people are interested in trading the same options that I am that it is not difficult to get stuck holding profitable contracts into expiration unless I offer to sell them for a lot less than they are worth. For some stocks, the option premium may make the move a loss of money. Browse other questions tagged stocks investing options or ask your own question. However, Joe, Options can also be used as a way of limiting your losses. Will update after I write article.
If one type of investment would certainly be more profitable than another, arbitrage would quickly erase the difference. In the long run you lose more than you profit.
