500% Gains and Losses—How Is That Even Possible With Options? | #OptionsHandbook EP010
📈 In the options market, it's common to see the underlying stock barely move—while the option tied to it jumps or dives. Why?
It all comes down to leverage—how options magnify both gains and losses.
📘 Here's how the Options Handbook explains it:
▶ Smaller Cost and Same Exposure 💸
Say you're bullish on a stock trading at $100/share. Buying 100 shares costs $10,000.
But instead, you buy 1 call for $1/share—totaling just $100.
This $100 is your option premium—a much smaller upfront cost for market exposure.
▶ Bigger Gains and Bigger Risks 🎢
With $100 invested in a call, if the stock moves from $100 to $105, your option premium might rise to $6.
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The stock gained just 5%.
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The option’s return: 500%-based on premium change.
That’s the power of options—high leverage that turns small moves into big outcomes.
Of course, the flip side is real: options can also go to zero. Leverage cuts both ways.
🎁 You’ll find more easy-to-understand option terms in the Options Handbook—now available in the Tiger Coin Center! 🐯✨
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>> Click here for the Simplified Chinese version <<
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