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Stocks vs Call Options | The CORRECT Comparison and Why This Chart is a Lie!

This is a video about this graph and why I absolutely hate it. If you’ve seen this before, this is a graph comparing the investment return of buying stocks vs call options. What it tries to do is compare the two investment strategies and it shows you two main things. First, that if you buy call options you limit how much you could lose and second that to make the same amount of money from buying a call option, a stocks price has to go up more than if you just bought the stock itself. If you’re confused at this point, don’t worry about it, I’ll explain all this a moment.

I suppose this chart is fine for what it is and you see it in finance textbooks and youtube videos on this topic all the time. But this chart is a lie. It’s making an absolutely absurd comparison that no one in their right minds would ever make in reality. Welcome to Data Demystified. I’m Jeff Galak and in this video we’re going to learn a LOT. I’m going to give you a quick introduction to stock options, with a focus on what are known as “calls” and I’m going to explain how you should actually compare them to stocks. To do that, we’re first going to learn what stocks and call options are, then explain this terrible graph in detail, and finally, if you stick around to the end, I’ll show you what this graph should actually compare when thinking about stocks versus options.



Learn more about who I am and why I'm doing this here: https://youtu.be/sLIquDwwTpw


Follow me at:
LinkedIn: https://www.linkedin.com/in/jeff-galak-768a193a
Patreon: https://www.patreon.com/datademystified


Equipment Used for Filming:
Nikon D7100: https://amzn.to/320N1FZ
Softlight: https://amzn.to/2ZaXz3o
Yeti Microphone: https://amzn.to/2ZTXznB
iPad for Teleprompter: https://amzn.to/2ZSUkNh
Camtasia for Video Editing: https://amzn.to/2ZRPeAV
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