Now that the market has rebounded from the tariff worries of early April and the indexes are back at all-time highs, if I were bullish on the market but also wary that it might be “toppy,” instead of buying stocks, I might instead buy call options.
Now, before I dive into my rationale for buying call options instead of stocks, I do want to note that I don’t think the market is nearing a top. As the old saying goes, the most bullish thing a stock or market can do is to make new highs. And in fact, as you can see below, investing when the S&P 500 is at a new high beats investing on any day by a healthy margin since 1988 (via @MikeZaccardi on X):
That being said, I’m sure plenty of investors are wary of this market given the ongoing tariff worries, the situation in the Middle East, or for any number of reasons. So …
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Let’s say I wanted to get more exposure to the market but also thought there was a chance that the indexes could fall.
Instead of plowing big capital into the S&P 500 or a stock star like Palantir (PLTR) or a total rocket ship like Circle (CRCL), I could put less money at risk by buying call options on those stocks.
How to Put Less Money at Risk by Buying Call Options
Here are the numbers that back up that thought process:
If I were to buy 100 shares of PLTR stock today, that would cost me $13,000.
However, if I were to buy 1 PLTR January 130 Call (expiring on January 16, 2026) that would only cost me $2,500, or $10,500 less than the stock purchase. And should PLTR stock move higher, this call option would rise dramatically in price, somewhat similar to owning the 100 shares outright.
However, if PLTR stock were to fall, the most I could possibly lose on this call buy is the $2,500 I paid for that option.
Similarly, if I wanted to roll the dice with a bullish position in CRCL, which has gone absolutely crazy, having run from 69 on June 4th to 192 today, instead of paying $19,200 for the stock, which could rise dramatically or completely crash, I might instead:
Buy to Open the CRCL November 195 calls for $38.
And much like the PLTR example above, should CRCL stock continue to move higher, the call will rapidly gain in value.
But if CRCL stock were to crash back to earth, the most I can lose is the $3,800 I paid for the call option.
Essentially, if you think the market is going higher but you also worry that there is a chance that stocks like PLTR and CRCL could fall apart, buying calls is a much cheaper way to get upside exposure.
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