The only place to buy option is that I expect the stock price will move dramatically in short time and the stock has the possibility to gap in the opposite direction. If the stock is expected to rise, we buy the call and otherwise, buy the put.
For example, I expect AAPL will rise 20% in one week. But maybe AAPL will have small probability to gap down 20%. Notice the gap down. Buy call option can eliminate the gap down.
If the stock is a big stock and have very little possibility to gap large drawdown, then I don't have to buy the option the hedge the lost and waste the premium. I can just use the STOP order.
I don't consider the leverage benefit of the option trading here. Just consider the premium and gap.
The best place to buy the option is the stock price and strike price is the same. At this point, the premium has the best performance/price. For example, if the stock price is at $5, I buy the $5 option. If the stock price is at $5.5, the best bet is wait it back to $5.
But sometimes, you cannot get the stock price is the same as the strike price. In this situation, if you expect the stock will gap and surpass the strike price, then you have to buy in. For example, if the stock price is at $7, and strike price is at $7.5, if you expect the stock price will gap the next day to $8 and will never back to $7.5, then you can then buy the option at $7.
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