Options Trading Basics

What Is an Option?

An option gives you the right (but not the obligation) to buy or sell an asset at a specific price before a specific date.

Call Options

Buy a Call — You expect the price to go UP. You have the right to buy at a set price (strike). Sell a Call — You expect the price to go DOWN or stay flat. You collect premium.

Put Options

Buy a Put — You expect the price to go DOWN. You have the right to sell at a set price. Sell a Put — You expect the price to go UP or stay flat.

Key Terms

• Strike Price — The price at which you can buy/sell
• Expiration — The date the option expires
• Premium — The price of the option
• In the Money (ITM) — Option has intrinsic value
• Out of the Money (OTM) — Option has no intrinsic value

Simple Strategies for Beginners

Covered Call — Own 100 shares, sell 1 call. Collect premium. Cash-Secured Put — Sell a put at a price you'd be happy to buy the stock at.

Risk Warning

Options can be extremely risky. Never buy options with money you can't afford to lose. Start with paper trading.