When traders think about explosive gains, options are usually the go-to choice. Leverage, low capital outlay, and outsized percentage returns make them appealing. But every now and then, something surprising happens — the stock itself outperforms the option.
Yes, it’s rare. But in strong momentum runs, holding the stock can sometimes beat the option — in both returns and peace of mind.
Why Would Stock Outperform Options?
Time decay kills options: Even if you're right on the direction, options lose value over time. If the stock doesn't move fast enough, your option premium may shrink — or even expire worthless.
Volatility crush: After big news (like earnings or a product launch), implied volatility may collapse, causing your option value to drop — even if the stock rises.
Delta lag: Deep out-of-the-money calls don’t react 1:1 with the stock. You may need a massive move just to break even.
Real-World Example?
Let’s say you bought a growth stock at $50, and it rallied to $90 in three months — an 80% gain. Meanwhile, a 3-month $60 call option might have cost $2.50, and risen to $9. Sounds great, right?
But depending on timing and volatility, that’s just a 260% return vs. 80% on stock — but with far higher risk and possibility of loss. Miss the timing by a week? The stock still gains, but your option could lose value.
So When Is Stock Better?
Strong long-term trends: In powerful bull runs, stocks may offer smoother upside, without the stress of expiration dates.
Volatility is low or declining: You don’t get crushed by a volatility reset like with options.
You want to scale in/out: Stocks offer more flexibility for managing position size.
Bottom Line
Options are powerful tools — but they’re not always the best tool. If you’ve ever seen your option decay while the stock climbed, you know the pain. Sometimes, the boring buy-and-hold stock position ends up winning the race.
Have you ever had a trade where your stock made more than the option would have? It’s not common — but when it happens, it feels good.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
