Explore Your Options by Tom Gentile
I understand that options can provide
less risk than stocks since the capital
outlay is much smaller, but when the
underlying moves against you, options
tend to lose money more quickly. Is
there any way to curb the rate of these
losses so as not to get stopped out so
This question is actually a twoparter.
First, letís address the assumption
that the losses occur more quickly.
This is actually a fallacy, in part because
of the leveraged nature of options.
Since the purchase of one option
contract that controls 100 shares of the
underlying can cost far less than the
stock itself, inexperienced traders assume
this simply frees up more capital
to purchase many more option contracts.