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Someone asked me a question during Opening Playbook the other day that I get asked all the time: Why not just buy the stock. It’s a fair question, and if you’ve ever wondered the same thing, you’re not alone.
I was walking through a ladder trade structure on Utilities (XLU), putting together a couple of spreads to build one cohesive trade, when someone in the chat asked why not just buy $1,000 worth of XLU and hold it. Wouldn’t you get the same benefit?
I did the math right there on screen. In these chaotic markets, running the numbers and understanding structure becomes an even more powerful proof of concept.
The Numbers Don’t Lie
Here’s what I showed them:
If you put $1,000 into XLU stock with a price target of $47 and the stock hits that target, you make $30. That’s it. Thirty bucks.
Compare that to the structured options trade I set up. If the stock goes up to my target, I make $700. Not $30, $700. That’s a 20X–30X better return on the exact same directional bet.
If the stock goes sideways instead of up, the stock position makes zero. But the options structure still makes $700. So not only do I make more when I’m right, I also make money when the stock just hangs around and does nothing.
Of course, your risk is easier to lose with options. If the stock drops hard, you can lose your entire position in the options trade, whereas with stock, you still own something. That’s the tradeoff.
Risk vs. Reward
That’s why we define our risk upfront: We know what we’re risking, what we can make, and we build the trade accordingly.
Options let us do things stock ownership can’t: You get leverage, flexibility, and the ability to profit in multiple scenarios, not just one. The structural advantages stand out fast.
We don’t trade options just because they’re interesting: We trade them because, especially when markets get choppy, understanding structure and how to apply it can be incredibly effective.
The next time you’re tempted to just buy the stock, run the numbers: See what the same $1,000 gets you in a well-structured options trade versus the stock itself. I think you’ll be surprised.
Now don’t forget to join us at 10 a.m. ET weekdays for Opening Playbook, and at 3:30 p.m. ET Closing Playbook!
Nate Tucci
Tucci Trades
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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