Combine Stock Trading With Options To Improve Returns – Options Trading with David Jaffee
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Combine Stock Trading With Options to Improve Returns

The best way to make a significant amount of money in the stock market is by combining long stock with an options trading strategy.

By having a watch list consisting of SPY, SPX, QQQ and stocks like Amazon, JP Morgan, Microsoft and then selling options on those specific stocks / ETFs, you can achieve gains that far exceed the S&P.

By selling options on these stocks and ETFs, you'll collect option premium.

Then, you can wait for these stocks and ETFs to pull back by 10% - 20%, take ownership of these stocks or ETFs and then participate in the upside.

By combining this long stock strategy, with a solid options trading strategy, you can significantly outperform the market and you can even protect your portfolio to reduce portfolio volatility. 

I discuss this in the education course at where effectively you can combine long stock with options in order to dramatically exceed  the returns of the overall market.

Combining options with stocks is the best strategy - especially when using portfolio margin since portfolio margin allows you to leverage off the long stock without significantly decreasing your available buying power.

When you sell options your maximum profit is  going to be the amount of premium that you collect.

The problem is that during periods of pullbacks, or bear markets, you're going to experience significant sequence risk, or correlation risk, where a lot of your positions are going to end up getting challenged.

If you're trading too large then you could be forced to close out that position at the most  inopportune time.

So instead, your best choice is to sell options, stay small, and take ownership of the stocks after the option strike price has been penetrated, then you can participate in the upside of the stock.

Additionally, you can buy options during periods of market extremes to reduce portfolio volatility.

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Conclusion: Combining Stocks with Options

Combining stocks with options is a great way to beat the market.

You can sell option using portfolio margin and take ownership of stocks at a reduced price and participate in the upside of the stocks.

Then, you can buy options during periods of market extremes.

Buying protective puts during periods of complacency, when the market is overextended, will allow you to profit from future volatility increases and reduce overall portfolio volatility.

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Frequently Asked Questions (FAQs)

Can I combine stocks and options?

Yes, and it's worthwhile to combine stocks and options because it can reduce portfolio volatility while increasing your returns.

Is there a Combining Stocks and Options Guide?

As Option Alpha says, an investor who believes a stock will be range-bound may sell a straddle to increase returns on a stock that is otherwise trading sideways. Covered calls or covered puts are examples of strategies that combine stocks and options. Covered positions are when options contracts are backed by shares underlying the option.

Even so, I think this is bad advice. Selling calls on stocks limits your upside potential. Also, straddles frequently get tested and necessitate many adjustments.

When to combine stocks and options?

When you feel that the stock market is oversold, then you can take assignment of the option and participate in the upside of the stock.

Hopefully during periods of complacency when the market is overbought, you have already purchased protective puts so that you can profit from future volatility spikes.

How Can I Learn More About Options Trading?


Should I Trade Options During a Bear Market?

Yes, if done correctly, then trading options will enhance your returns and allow you to beat the market.

Should I buy call options?

While I previously wasn't a fan of buying call options, I believe that there are times where it makes sense to buy call options. 

Specifically during periods of high volatility, when VIX is trading around 35, and after the market has already pulled back by ~25%.

While buying a call in this situation will still possess a probability of profit of below 50%, the real-world trading results of buying long-dated calls after a major sell-off will likely far exceed the overall returns of the S&P.

About the Author David Jaffee

I (David Jaffee) help people become consistently profitable traders while minimizing risk. I graduated from an Ivy League University and worked at some of Wall Street's most successful investment banks. Subscribe to my YouTube channel for valuable videos - BestStockStrategy YouTube Channel‚Äč. Finally, if you're looking to Land a Finance Job, then I've put together the best step-by-step course at My personal website is

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