Consider options spreads. A spread is where you buy a call at one price, and sell a call at another price. The thing about options is that they are a timed co

Consider options spreads. A spread is where you buy a call at one price, and sell a call at another price. The thing about options is that they are a timed contract. Come expiration date, the value of the option depends %100 on the stock price. Before the expiration date, the value of the option is the intrinsic value (how much it is in the money) plus a time premium. Over time, this premium erodes. When stocks are very volatile, the premiums is rather high, and thus the return on the option is impacted by this premium. With a spread, since you're buying and selling both, you lower your total cost, while still capturing the profits in the range between the two strike prices. This means you're also selling premium at the same time you're buying it, reducing the impact of volatility on your costs and returns. For instance (this is not an endorsement of this trade, just an example) you could buy the JAN 2014 $450 CALL and sell the JAN 2014 $550 CALL. Let's compare that to just buying the $450 call. The 1/2014 $450 CALL is $186. (Current price is $585, so this $186 is about $130 in intrinsic value and about $50 in premium.) If you buy that you've got $18,600 at risk. (A call contract covers 100 shares.) This is a lot cheaper than buying 100 shares of Apple which would cost you $58,500. However if you enter into the spread, you buy the $450 call for $18,600 and sell the $550 call for $126 X 100 = $12,600 costing you a total investment of $6,000. When you make that sale, you're selling about $36 in intrinsic value and collecting $90 in premium.) Lets consider three scenarios for Options expiration in January of 2014: Apple at $400, $500, $600 & $700. Apple at $400: Long the stock: You've invested $58,500 for 100 shares of stock that are now worth $40,000. You've lost $18,500. Buy the $450 Call: You've invested $18,600 in calls which are now worthless[1] because the stock is at $400. You've lost $18,600. Buy the $450-$550 spread: You've lost $6,000 in a spread which has expired worthless because the stock is at $400.[2] Result: The spread wins. Apple at $500: Long the Stock: $58,500 invested in 100 shares now worth $50,000. $8,500 loss. Long $450 Call: $18,600 in calls which are now worth $50 x 100 = $5,000. $12,600 loss. $450-$550 Spread: $6,000 in a spread that is now worth $5,000 = $1,000 loss. Result: The spread wins. Apple at $600: Long the stock: $58,500 invested, now worth $60,000 = $1,500 profit. Long the $450 call: $18,600 invested, now worth $15,000 = $3,600 loss $450-$550 spread: $6,000 invested, now worth $10,000 = $4,000 profit Result: The spread wins Apple at $700: Long the stock: $58,500 invested, now worth $70,000 = $11,500 profit Long the $450 Call: $18,600 invested, now worth $25,000 = $6,400 profit $450-$550 spread: $6,000 invested, now worth $10,000 = $4,000 profit Result: The stock wins. Now, there are several factors I haven't illustrated here.... the main one being returns. The spread is much, much cheaper than the others, so when it profits, by a returns basis, it does much better. The other factor is, the likelihood of Apple being $550 in 2014 and the likelihood of it being $700 in 2014 are not the same. Generally, the lower the price you're "betting" on, the more likely things are to end in the money. Finally, a lot more people have $6,000 to risk than $18,000 or $58,000. Hope this is useful. I highly recommend reading McMillins "Options as a strategic investment" (not sure about the author name, very sure about the book title.) [1] Of course if things weren't working out as you expected by the summer of 2013, you could probably have rolled over from January 2014 to January 2015 for a small fee. If one had bought Jan 2009 Calls and the 2008 crisis happened, and they decided to roll over to 2010, they probably would have preserved their investment. Options give you options, but you have to pay more attention to them than the stock. If you bought the stock in 2006 you could have forgotten about it until today and then been pleasantly surprised. [2] Spreads can be rolled over as well, like the call option was, by entering a trade that sells your long position while simultaneously buying a long leg at a later expiration and buys your short position while simultaneously selling a short leg at a later expiration. You can enter transactions that involve four legs (or more) and have them all execute simultaneously (or not at all if they can't all execute.)