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Differences Trading Stocks and ETFs

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

While a stock tracks an individual company, ETFs track collections of assets like indices, commodities, or bonds. This results in different risk profiles since stocks are subject to unsystematic, company risk and ETFs are inherently diversified. ETFs tend to have lower IVs but have less tail risk than stocks, and allow an investor to have sector exposure without single company risk. Stocks tend to have higher IVs, which may be a benefit to investors who are familiar with a particular sector or company and want additional exposure.

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