Options vs. stocks

Both stocks and options carry unique advantages and drawbacks. One is better for beginners, while the other should only be handled by seasoned investors.

What’s the difference?

When you buy a stock, you essentially purchase a slice of ownership in a company. And the size of that ownership depends on how many shares the company has on the market. Purchasing stock turns you into a shareholder because you own, or hold, shares — at least until you sell them. Stocks vary in price, from penny stocks worth fractions of a dollar to blue-chip stocks worth thousands per share. Stocks can be bought and sold during market hours through a brokerage account. An option is a contract to buy or sell a stock. The contract gives the investor the option to purchase or sell a set number of shares at a set price by a specific date. The number of shares accessible through the contract depends on the contract multiplier. Most options contracts have a contract multiplier of 100.
An options contract is just that: an option. You’re not obligated to buy the corresponding stock, but you can if you choose to. Unlike stocks, options don’t represent ownership of a company. An option is merely a contract that locks in a stock price for purchase or sale over a set period of time.

Benefits

Both options and stocks have benefits specific to the way they’re traded.

Options

Options contracts have plenty to offer — if you know how to trade them:

• Flexible. Unlike stocks, which are limited in execution, you can profit from options contracts in many ways. Investors can exercise the option, purchase shares and hold onto the shares. They can exercise the option, purchase shares and sell the shares. Or they can sell the contract to another investor.
• Less capital. Since options represent the value of an opportunity — not the full value of the stocks themselves — investors need less capital to get started. Unless they exercise the option and purchase shares, investors only pay the premium to purchase the contract.
• Exponential profit. Options traders have the potential to earn a higher profit with less upfront capital by using leverage to anticipate the movement of a stock.

Stocks

Stocks are a staple in many investor portfolios. Why? Because they’re easy to trade and have many benefits:

• Buy low and sell high. When you buy a stock, you’re essentially betting that the price of that stock will go up. Whether you sell in a week, a month or a year, selling a stock for more than you paid earns you a profit.
• Simple. It’s hard to argue with the simplicity of stocks. They’re one of the most straightforward, beginner-friendly securities on the market. You pay what the stock is worth at the time of purchase, and when you sell, you receive the current market value of the stock.
• Dividends. Some stocks offer dividends: regularly scheduled payouts for shareholders based on the performance of the company. Investors can earn passive income just for holding shares of a dividend-paying stock.
• Low expenses. Most trading platforms today offer commission-free stock trades, which means you can buy and sell shares to your heart’s content without worrying about fees eating into your profits.

Risks

Whether your trade stocks or options, you risk losing capital.

Stocks

The value of a stock is inextricably tied to the performance of the company it belongs to. Another big factor is the market’s overall movement. When you buy a stock, your money is locked into the investment until you sell. And while there’s no decision deadline — at least, not in the way options contracts operate — you may face losses by holding onto a poorly performing stock. And what if the company you’ve invested in goes out of business? You’ll lose your investment entirely.
In some ways, there’s more risk associated with buying stocks than buying options contracts. If you buy an options contract and the stock tanks, the most you’ll lose is the premium you paid for the contract, which may only be a couple hundred dollars. But if you’ve poured funds into buying the stock outright and the company folds, you’ll lose everything you invested.

Options

Options trades carry risk for two reasons: they’re complex and they require leverage. Whether you’re buying or selling an options contract, there are many decisions you need to make. You’re not just betting on whether the stock will rise or fall. Be aware of how economic events could affect the business over the course of the contract. Since options have an expiration date, you’re taking a time-sensitive gamble. All investments carry risk, but there are specific risks associated with trading options that investors won’t encounter elsewhere. And that’s because options contracts use a contract multiplier to leverage the investment position. Most options contracts have a contract multiplier of 100, which means the option represents a contract for 100 shares.

Can stock ever become completely worthless?

Yes, if a company goes bankrupt and the stock drops to $0 before being delisted, it’s possible to lose your full investment. But stocks often take a long time to get down to $0, especially if they’re worth a lot when you buy in, which means you’ll likely have opportunities to sell before a stock becomes worthless.
While all stock-based investments are inherently risky, there’s a much higher chance of losing your full investment with an options contract than if you buy stock outright.

How to choose

Are stocks or options a better fit for your portfolio? Here’s how to decide:

• Experience. Let your experience level guide your investments. Stocks are best for those just starting out, while options require more trading experience and market knowledge.
• Capital. Options trades make use of leverage to amplify profits with less capital.
• Margin trading. Most options trades are executed through margin accounts, which is a special investment account that lets you borrow funds from your broker. If you prefer to use the cash you have on hand, you may prefer stocks.
• Timeline. Stocks are best for those using a long-term buy and hold strategy, while options have shorter turnarounds.
• Risk tolerance. How much are you willing to lose? There are risks associated with both securities and the right asset for your portfolio will hinge on your risk tolerance.

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Finder Score	Available asset types	Stock trade fee	Minimum deposit	Cash sweep APY	bullet point infobox
Promoted Finder score 9 Excellent SoFi Active Invest	Finder score 9 Excellent	Stocks, Options, Mutual funds, ETFs, Alternatives	$0	$0	0.01%	Get up to $1,000 in stock when you open and fund a new account. T&Cs apply.	Trade stocks, ETFs, and options with zero commissions, invest in IPOs or automate your portfolio, with exclusive perks available through SoFi Plus.	Important information INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE Other fees, such as exchange fees, may apply. Please view our fee disclosure to view a full listing of fees. Investing in alternative investments and/or strategies may not be suitable for all investors and involves unique risks, including the risk of loss. An investor should consider their individual circumstances and any investment information, such as a prospectus, prior to investing. Interval Funds are illiquid instruments, the ability to trade on your timeline may be restricted. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA (www.finra.org) /SIPC(www.sipc.org). There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire investment Before trading options please review the Characteristics and Risks of Standardized Options Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see https://www.sofi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information SoFi Plus members can schedule an unlimited number of appointments with a financial planner during periods in which the SoFi Plus member meets the eligibility criteria set forth in section 10(a) of the SoFi Plus Terms and Conditions. SoFi members who are not members of SoFi Plus can schedule one (1) appointment with a financial planner. The ability to schedule appointments is subject to financial planner availability. SoFi reserves the right to change or terminate this benefit at any time with or without notice. Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease Robo Advisor: Automated investing is offered through SoFi Wealth LLC, an SEC-registered investment adviser. 0.25% fee is based on your account value. The wrap program fee may cost more or less than purchasing brokerage, custodial, and record keeping services separately. Terms and conditions apply*. For 401k rollovers, existing SoFi IRA members must complete 401k rollovers via this link For SoFi members without a SoFi IRA, a SoFi IRA must first be opened, and 401k rollover must be completed utilizing Capitalize via this link. SoFi and Capitalize will charge no additional fees to process a 401(k) rollover to a SoFi IRA. SoFi is not liable for any costs incurred from the existing 401k provider for rollover. Please check with your 401k provider for any fees or costs associated with the rollover. For IRA contributions, only deposits made via ACH and cash transfer from SoFi Bank accounts are eligible for the match. Click here for the 1% Match terms and conditions.	Go to site More info	loading
Promoted Finder score 8.2 Great Zacks Trade	Finder score 8.2 Great	Stocks, Bonds, Options, Mutual funds, ETFs, CDs	$0.01	$250	2.83%	Leverage powerful trading tools and low margin rates to trade stocks, options, ETFs, mutual funds and bonds.	Go to site More info	loading
Promoted Finder score 9.4 Excellent Robinhood	Finder score 9.4 Excellent	Stocks, Options, ETFs, Cryptocurrency, Futures, Event contracts, High-yield cash account	$0	$0	3.75%	Get a free stock when you successfully sign up and link your bank account. T&Cs apply.	Trade stocks, options, crypto and more, with advanced trading tools, fractional shares and exclusive perks for Gold members.	Go to site More info	loading
Finder score 9.4 Excellent Webull	Finder score 9.4 Excellent	Stocks, Bonds, Options, ETFs, Futures, Money market funds	$0	$0	3.85%	Deposit or transfer $100,000+ to earn a 4% Match Bonus, or $2,000+ to earn a 3% Match Bonus. Plus: Get a $100 transfer fee reimbursement on your first brokerage transfer of $2,000 or more. T&Cs apply.	Trade stocks, ETFs and equity options commission-free, with access to futures, advanced charting tools, a robo-advisor and event trading powered by Kalshi.	Go to site More info	loading
Finder score 9.2 Excellent Interactive Brokers GlobalTrader	Finder score 9.2 Excellent	Stocks, Options, Mutual funds, ETFs, Cryptocurrency	$0	$0	3.83% Lite 4.83% Pro	Trade in a simulated trading environment and access a wide range of tradable assets.	Go to site More info	loading
Finder score 8.2 Great eToro	Finder score 8.2 Great	Stocks, Options, ETFs, Cryptocurrency, Investments	$0	$0	3.75%	No commission stock, ETF and options trades, with 3.9% interest on your options account balance and no options contract fees. See full disclosure.	Important information eToro securities trading offered by eToro USA Securities, Inc. (‘the BD”), member of FINRA and SIPC. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Finder is not an affiliate and may be compensated if you access certain products or services offered by the BD.	Go to site More info	loading
Finder score 9 Excellent Public.com	Finder score 9 Excellent	Stocks, Bonds, Options, ETFs, Cryptocurrency, Investments, Retirement, Treasury Bills, High-yield cash account	$0	$0	3.8%	Get up to $10,000 and transfer fees covered when you move your portfolio to Public. T&Cs apply.	Build a diversified portfolio of stocks, bonds, options, ETFs and crypto, with a high-yield cash account and options contract rebates.	Important information *Yield as of 04/09/2025. Learn more.	Go to site More info	loading
Finder score 8 Great Acorns	Finder score 8 Great	Stocks, ETFs	$0	$0	N/A	Get a $20 bonus when you set up an account and make your first recurring investment (min. $5). T&Cs apply.	Automate investing with recurring contributions starting at $5 and invest spare change from everyday purchases.	Go to site More info	loading
Finder score 7.4 Great Stash	Finder score 7.4 Great	Stocks, ETFs	$0	$0	0.1%	Get $5 when you sign up and deposit $5. T&Cs apply.	Bank, automate your portfolio or invest in individual stocks and ETFs for as low as $3 per month.	Important information Investment advisory services offered by Stash Investment LLC, a SEC registered investment advisor. Investing involves risk and investments may lose value. Holdings and performance are hypothetical. *Offer is subject to T&Cs	Go to site More info	loading
Finder score 9 Excellent Wealthfront	Finder score 9 Excellent	Stocks, ETFs, High-yield cash account	$0	$500	3.75%	Get a $50 bonus when you sign up and fund a taxable automated investing account with at least $500. T&Cs apply.	Automate your stock and bond portfolio or trade individual stocks for as little as $1 apiece. Plus, earn 3.50% APY on your cash.	Go to site More info	loading
Finder score 7.2 Great J.P. Morgan Personal Advisors	Finder score 7.2 Great	Mutual funds, ETFs	$0	$25,000	N/A	Financial planning, advice and portfolio management. T&Cs apply.	Get ongoing access to an advisory team with personalized financial planning and expert-built portfolios. Provider terms & conditions apply	Important information INVESTMENT PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE.	More info	loading
Finder score 8.2 Great M1 Finance	Finder score 8.2 Great	Stocks, ETFs, Cryptocurrency	$0	$100	4.00%	Build a custom portfolio of stocks and ETFs with automatic rebalancing. Plus, earn 4.00% APY with a high-yield cash account.	Important information M1 Finance, LLC does not charge commission, trading, or management fees for self-directed brokerage accounts. You may still be charged other fees such as M1’s platform fee, regulatory fees, account closure fees, or ADR fees. For a complete list of fees M1 may charge visit M1 Fee Schedule. M1 is not a bank. M1 Spend is a wholly-owned operating subsidiary of M1 Holdings Inc.. M1 High –Yield Savings Accounts are furnished by B2 Bank, NA, Member FDIC. Obtaining stated APY (annual percentage yield) with the M1 High-Yield Savings Account does not require a minimum account balance. Stated APY is accrued on account balance. APY is solely determined by M1 Spend LLC and its partner banks, and will include account fees that will reduce earnings. Rates are subject to change without notice. M1 High-Yield Savings Account is a separate offering from, and not linked to, the M1 High-Yield Cash Account offered by M1 Finance, LLC. M1 is not a bank.	More info	loading

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What is the Finder Score?

The Finder Score crunches 147 key metrics we collected directly from 18+ brokers and assessed each provider’s performance based on nine different categories, weighing each metric based on the expertise and insights of Finder’s investment experts. We then scored and ranked each provider to determine the best brokerage accounts.

We update our best picks as products change, disappear or emerge in the market. We also regularly review and revise our selections to ensure our best provider lists reflect the most competitive available.

Read the full Finder Score breakdown

Bottom line

Both stocks and options have their place, each with a unique set of benefits and risks to consider. Before you invest in either, explore your account options across multiple platforms to find the best brokerage for your needs.

Frequently asked questions

• Where can I trade stocks?

  Almost all brokerages offer access to stocks, including Charles Schwab, Robinhood and more.

• Where can I trade options?

  Most brokerages offer options trading, but not all. There are some platforms, like Tastytrade, that specialize in options trading.

• What is a call option?

  A call option is an options contract that gives the owner the right to purchase a set number of shares at a specific price by a designated date.

• What is a put option?

  A put option is an options contract that gives the owner the right to sell a set number of shares at a specific price by a designated date.

Written by

Shannon Terrell

Editor

Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga. See full bio

's expertise

has written 74 Finder guides across topics including:

• Share trading
• Robo-advisors
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