Can you share what are the main reasons in trading options vs using stop
losses for the underlying? besides leverage...I can achieve leverage
just by trading the underlying on margin. I think I read a paper
somewhere are advantages of options but can't recall. The way I see it
Stop Loss is cheaper since they don't "expire" and don't have to pay
time premiums for them.
Not sure what I can tell you. Options are totally unrelated to stop
losses. True, some investors use options to gain leverage, but options
are versatile investment tools that can be used for a variety of purposes.
Options can be bought or sold. They can be used in speculative or
conservative strategies. They can be used to hedge (reduce the risk of
owning) a stock position.
You can reduce risk, other than by entering a stop loss. And, just as
reminder, even with a stop loss in place, there is no guarantee. For
example, you may enter a stop loss at $52, but if the stock, on bad
news, gap opens at $35, then $35 is the price you get.
I'd like to be more helpful, but I cannot give you an introductory
course in an e-mail. Consider getting a good beginner's book, or visit
888options.com and take a look at some introductory material.