When Jim Van Meerten, author of Barchart’s Chart of the Day newsletter, was asked about trading options vs. shares, his answer was direct:
“There are fewer people that are successful in options trading than in stocks. A higher percentage of people buying and holding stocks make more money in the long run than option traders do.”
That might surprise some traders, but it’s true that options introduce an element of risk that most stock positions don’t carry – specifically, an expiration date. While most traditional buy-and-hold investors can simply ride out periods of choppy or unfavorable price action by practicing patience, options trades typically don’t offer that luxury of time.
So, does that mean you should avoid options entirely? Let’s break it down.
Shares vs. Options: Pros and Cons
Why Shares Can Feel Safer
- Long-term bias: Stocks historically trend higher over time, especially if you buy fundamentally strong companies.
- Simplicity: You own part of a business; profits and losses are easier to understand.
- Flexibility: You can hold indefinitely, collect dividends, or use shares as collateral.
How Options Introduce Complexity
- Pricing model: Volatility, interest rates, and time premiums make option pricing less intuitive, and can contribute to overpaying at entry.
- Time decay: As a buyer, your option will lose value at an increasing rate until it expires. That means the underlying stock can do nothing and your option will still lose value.
- Expiration date: Unlike a traditional stock position, your option will expire, which adds the difficulty of timing to your strategy.
But here’s the catch: Options can be powerful when used strategically — like generating income with covered calls, hedging stock positions with puts, or defining risk with spreads.
The problem is that many traders treat options like lottery tickets, misunderstand the risks, overtrade, or use the wrong strategies.
Takeaway for Traders
Jim’s preference for shares over options is rooted in probability and preference, but options still have a place in a well-rounded toolkit — if you understand the mechanics, strategies, and risks.
That’s where education matters.
Want to Trade Options the Right Way?
If you’re curious to learn about options beyond the “gambling” mindset, check out Barchart’s Options Learning Center. You’ll find step-by-step guides and videos on:
- Delta, Theta, Vega, Gamma — and what they mean in plain English
- High-probability strategies like covered calls, spreads, and hedges
- How to use Barchart’s PnL charts and screeners to evaluate trades before you pull the trigger
Watch this quick clip with John Rowland, CMT, as Jim breaks down why he prefers shares over options:
Explore the Options Learning Center to start building your knowledge the smart way.
Watch this beginner’s guide on options education to get you started:
