Good morning, traders…

I’ve heard people say you shouldn’t be a “perma-bull” or a “perma-bear,” but I have to disagree.

If you’ve been a perma-bull over the past 20 years, you’re probably sitting on a downright fortune.

The S&P 500 has delivered an annual compound total return of 11.9% from 2014 to 2023, and about 10.65% annualized from 2005 to 2024. 

Meanwhile, the perma-bears — those sad people constantly calling for the “Mother of All Market Crashes” — are likely still waiting for their elusive Black Swan, and in the process, missing out on some of the best money-making opportunities in history…

The U.S. stock market has a built-in upward bias. Businesses grow, innovation pushes the economy forward, and money keeps flowing into stocks, driving prices higher over time. 

Betting on that long-term growth isn’t blind faith — it’s stacking the odds in your favor.

But there’s more to it than just market trends. 

Not only do stocks naturally tend to rise, but there’s also a hidden secret in the way options are priced that makes the risk/reward on calls even better than most traders realize. 

With that in mind, let me show you why I prefer to trade calls over puts…

The Market Likes to Go Up

The first and simplest reason I prefer to trade calls is that they align with the general trend of the market. 

Most of the time, stocks go up. Over the past five years, the S&P 500 has delivered an annualized return of 13.3%.

Sure, there are pullbacks and corrections, like the one we saw starting on December 18…

But the usual direction, especially in a healthy economy, is up. That means call options naturally align with this tendency, giving them a better shot at success.

Recognizing (and acting on) this fact is how I achieved an 89% win rate on my OMEN Scanner trades…*

Trying to bet against the market with puts means fighting against years of historical data, not to mention the constant flow of institutional money propping things up. 

The market is designed to grow, making shorting it an uphill battle. Calls take advantage of that steady climb, making them a more reliable tool for trading trends.

Puts Trade at a Premium

Puts typically trade at higher implied volatility (IV) than calls, which makes them more expensive. 

The primary reasons for this are:

• Downside Protection Demand: Institutional investors, such as pension funds and hedge funds, frequently hedge their portfolios with puts to protect against market downturns. This persistent demand drives up put prices.
• Skew and Tail Risk: Market crashes tend to be sharp and fast, whereas rallies are usually gradual. This leads to the volatility skew, where out-of-the-money (OTM) puts have higher IV compared to OTM calls, reflecting the market’s asymmetric risk profile. Traders are willing to pay a premium for “insurance” against black swan events — and market makers feel a need to charge a premium in the event of an asymmetrical skew event to the downside. 
• Leverage and Portfolio Hedging Needs: Large institutions often have long-only portfolios and use puts to hedge their downside risk. They might use covered call strategies instead of outright buying calls, which limits speculative demand for calls.

Due to consistent demand for protection, puts are often significantly more expensive than calls. 

Studies show that IV for OTM puts can be 20-30% higher than comparable calls, depending on market conditions. 

This means that buyers are paying a hefty premium, which requires a larger downside move just to break even.

If the market doesn’t drop hard enough, and fast enough, the higher cost of puts can eat into potential profits. 

Meanwhile, calls are cheaper and offer a better risk/reward scenario, since stocks tend to rise gradually, rather than collapse overnight.

This pricing quirk — where puts trade at a premium due to fear-driven demand — gives call buyers like me a massive edge. 

While institutions and retail investors overpay for downside protection, call buyers can take advantage of lower premiums that benefit from the market’s natural bullish bias.

How Demand Drives Options Pricing

Options are priced based on several factors, but IV is the market’s expectation of future movement. 

And that expectation is heavily influenced by demand…

When more traders and institutions buy puts for protection, IV increases, which inflates the option’s price. 

This is why puts, especially out-of-the-money (OTM) ones, often carry a higher IV than their call counterparts. The market assigns a higher probability to a sharp selloff because fear drives demand.

This demand-based skew is especially visible during uncertain market conditions. When investors fear a downturn, they flood into puts, pushing IV higher and making them more expensive. 

Sure enough, this is happening right now. 

At the same time, calls remain relatively cheap because most of the big options money is going into puts protecting enormous portfolios. 

Demand acts as a hidden force behind IV. This effect becomes even clearer when comparing IV levels across different strikes. 

In most cases, you’ll see that puts trade with higher IV at equivalent strikes compared to calls, reflecting the market’s built-in bias toward protecting against downside risks.

Another interesting dynamic is how demand can fluctuate based on external events such as earnings reports, economic data releases, or geopolitical tensions. 

Before major events, traders often load up on both calls and puts, causing IV to rise across the board. However, once the event passes, demand typically falls, and options prices deflate. This is called IV Crush.

For traders who understand how demand skews pricing, there’s an opportunity to capitalize on…

Are Calls Too Cheap?

If puts are consistently expensive due to demand, it begs the question — are calls underpriced? The short answer is: often, yes. And this is where a big part of my edge comes from.

Despite the market’s long-term upward bias, several structural factors work to keep call options cheaper than they might otherwise (or probably should) be:

Market Structure Favors Steady Growth

The structure of the stock market gradually grinds higher, while sell-offs are usually sharp and fast. 

Stairs up, elevator down. 

This difference in expected movement means realized volatility is typically lower on the upside and higher on the downside. 

Since options pricing models (Black-Scholes) factor in volatility, this results in lower premiums for calls compared to puts.

Persistent Call Selling Pressure

Many institutions and retail investors engage in covered call strategies, where they sell calls against stock positions to generate income. 

This consistent call-selling pressure keeps call prices in check and prevents them from rising as much as they might in a purely speculative market.

Psychological Bias Toward Fear Over Greed

Fear tends to be a stronger motivator than greed. Investors are more willing to pay a premium to protect against losses than to speculate on gains. 

(I just wrote about this last week.)

This bias skews the balance, leading to inflated put premiums while calls remain relatively affordable.

Liquidity and Order Flow Dynamics

Because large institutions often buy stocks outright rather than speculate with calls, there’s naturally more liquidity and tighter spreads in puts, further keeping call prices lower in comparison. 

This creates opportunities for traders willing to take advantage of the relatively cheaper call options.

So, why does this matter? It means that call buyers have a significant edge when trading bullish trends. 

If calls are systematically underpriced relative to their potential upside moves, traders focusing on breakouts and pullbacks can enter positions at a lower cost with a potentially higher return on investment.

Still with me? Okay, there’s one more thing…

Uptrends Are Easier to Trade

Another reason I stick with calls is that upside moves tend to be smoother and easier to manage than downside shocks. 

When stocks go up, they usually do so in a controlled, step-by-step fashion — pullbacks, consolidations, breakouts. 

These patterns make it easier to plan trades and find clear entry points on the long side.

Contrarily, downside moves are often sudden and chaotic. Market crashes don’t follow the same predictable rhythm as bullish trends. They’re usually sharp, violent, and difficult to time. 

While it’s possible to profit from downside moves, the odds of consistently catching them at the right time are incredibly low. 

And since those crashes are rare compared to the market’s steady grind higher, focusing on calls makes a lot more sense.

It’s not easy to win in the options market. To do so, you need to put yourself in the highest-probability positions, with the best risk/reward possible.

Calls offer both of these, plus smoother trends, and cheaper pricing compared to puts. 

Bottom Line: Much of the market overlooks the opportunities calls provide, but the data suggests they are often the smarter, simpler way to trade.

Happy trading,

Ben Sturgill

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*Past performance does not indicate future results