If you are following trends, the trend has already begun (so you detect it), so you are closer to the trend end, as compared to a trend-fader. Options limit the amount at risk, so if the trend is near to end, you risk much less. With options you can tolerate much more downside fluctuations? (trends last more than most people think, but temporary fluctuations may wipe off undercapitalized, overleveraged or easily scared traders)
We have similar thoughts, though my personal line of thinking would be to specifically focus on ITM options (currently developing this myself). My rationale behind considering options vs. underlying is as follows... Pros - Defined risk (specifically being long puts/calls), with no risk of additional downside. One can choose to risk x% of trading account on each trade, and know that risk will not exceed the desired percentage. Particularly important when trading is related to individual stocks, but still important for broader ETFs...never know when a substantial "big event" can impact you. - Lower capital requirements. Capital required to purchase ITM options is a fraction of the capital required to hold a position in the underlying. For example, an ITM option on a $20 stock might trade for $2.00 ($200 capital) vs. $2,000 required to hold a 100 share position in the underlying (ignoring margin). - Leverage. If you are wrong, you can easily lose your entire premium, which makes defined level of risk very important to long-term survival (i.e. don't invest 100% of account in a single type of option). If you are correct, even an ITM option can provide an attractive return on initial premium. - Ability to "short" a stock in a Canadian RRSP (retirement account). We are not allowed to hold short positions in a RRSP account, but are allowed to purchase puts, which effectively allows one to be short a stock, ETF, etc. Cons - Bid/ask spread is not typically as attractive as underlying. - Potentially limited time frame to be correct, vs. the ability to be long/short the underlying "forever" if correct.
I like to use slightly ATM or OTM (delta 0.4-0.6) to trade trends, especially on individual stocks. IMO, 3-6 month allows you to mitigate your theta exposure, keep bid/asks fairly reasonable, minimze overall capital risk, and still allow you to participate in most of the move. I like the ATM or slightly OTM because gamma works in your favor both ways: reducing delta (i.e: decreasing your loss rate) as a position moves against you and increasing delta (i.e: increasing your rate of gains) as it moves in your favor.