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Stock or Options | Trading Time

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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.

As we continue with our attempts to answer the investing question, Stocks or Options?, we wanted to use today’s segment to discuss one of the key differentiating factors between owning stock and trading options – time.

While stocks have an indefinite life, options always come with an expiration date. This unique characteristic creates opportunities for an option trader. Specifically, options “decay”, as they approach expiration, ceteris paribus.

Thus, this natural, downward drift in an option’s price is advantageous for the option seller, as they benefit from lower option prices.

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