There are many benefits to trading ETFs over common stocks. They have benefits that allow all types of traders to profit.
There are many benefits to trading ETFs over common stocks. They have benefits that allow all types of traders to profit.
1. ETFs are normally more stable than a common stock. Because these stocks are already diversified they will normally not give you any big surprises, like dropping 50% in one day. While it is rare Common stocks can have unexpected news that can push a stock one way or another.
2. ETFs offer high premiums. Everyone who loves to sell options should take a look at ETFs. They will often offer out of the money options with high premiums. That makes them a good candidate for selling out of the money puts or for selling covered calls.
3. ETFs often have high trading volume. They are normally actively traded which makes it ideal to make short term gains. Because they are actively traded you will be able to move in and out of the fund with relative ease and with little effect on the fund.
4. ETFs will often have options that are actively traded as well. This allows you to get in and out of option contracts with little effort. You also are able to attempt going in-between the spreads of options in order to buy them at a cheaper rate.
While ETFs have many benefits to them they also have a few drawbacks.
1. They do not move as fast as regular stocks. This fact is both a blessing and a curse. It aids you by making it able for you to gain some stability, but it also makes it harder for you to make the higher returns that stocks can produce.
2. ETFs do not always have actively traded option. In fact some ETFs may not even offer options. However if you are trading the bigger ETFs like the SPY and QQQQ’s you should have no problem if you want to trade options on it.
ETFs offer many advantages and disadvantages but it is good for a trader to keep a few ETFs on their radar at all times.
For more information about ETFs visit http://www.stocks-simplified.com/etfs.html
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