Buying calls can be a great way to leverage your money in the stock market. When applied with technical analysis and fundamental analysis there is no limit to how much they can produce.
Because calls give you so much leverage swing traders will use them to generate themselves huge gains or losses over a few days. In fact calls are becoming known for giving ways to make quick money.
Little people realize that they can also give off great returns after months of holding them. In fact your gain can be even greater because stocks can move further in a couple months then they can in a couple days.
There are a few reasons why long term calls can work better then short term calls
1. You are less affected by day to day movements. You might buy a short term call on a stock with good fundamentals in a solid uptrend expecting a quick upward movement. But if the stock pulls back even further, you may lose all or most of your option value.
If you had a long call you could afford for the stock to move back a little. With long term calls day by day actions do not affect you as much. You are just looking for stocks that will go up after a few months.
2. They lead to steadier appreciation. Swing trading with options can lead to fast 100% gains overnight, they can also lead to fast 50% losses overnight. Buying options many months out is likely not to lead to such drastic price fluctuations.
Steadily gaining a 100% return on your option after a month or two can help your account grow just as fast as trying to make quick large returns.
3. Timing is less important. Even though timing is very big no matter what options you are buying it is not as important to get in at the exact bottom of the pullback. And sell at the top of the pull back. You can afford to be off a little.
Buying long term calls can help to accelerate your gains in the market. Of course they have the power to work both ways. If you are losing money in the market call options are likely to lose you money faster.
This makes it incredibly important to practice trading with calls to develop your own rules prior to actually trading with them. If they interest you make sure you actually can use them to make money first.
For more information on calls visit http://www.stocks-simplified.com
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