I was having a long hard think today (well, tonight to be more precise) about what would be more profitable...
To trade shares outright and pay 0.07% brokerage, or trading options on ASX listed companies and paying 0.28% brokerage?
I was trying to put some numbers into a spreadsheet but didn't get very far.
Like I put "buy 200 XYZ at $50, sell 200 XYZ at $55" = $1000 gross profit
Then below that I put in 0.5 (50 cents profit per option) x 100 (contract size) x 100 contracts plus brokerage... = $5,000 gross profit
I wrote this to simulate an option going from $1 to $1.50.
For those two examples above I used a hypothetical bank of about $10,000.
It seems to me there are more profits to be made trading options, but also higher fees (which I don't like. Also I'm unsure how tax works at the end of the year for option traders....)
If this is correct, and option trading is more profitable than mere outright share trading, why don't more people trade options? Is it just me or do most people prefer to trade shares?
Am I missing something??