We have discussed in several previous articles the benefits of a pairs trade approach. A pairs trade is simply taking a bullish position on the stock you feel will do better than a similar stock that you take a bearish stance on. Buy Ford/Sell General Motors the classic example if you think Ford will outperform GM.
Instead of using simple stock to express the viewpoints, it is in many ways better to use options. Why? Limited risk, lower upfront cost along with three somewhat less known, but very important, benefits.
