How to Trade Options - Basics for Beginners, Calls and Puts

Discover the big picture of options trading and essential terminology, linking options to buying and selling stocks, with emphasis on the most important concepts first.

Learn when you’re ready to trade options by completing the first step: understand options terms and concepts, then practice selling cash-secured puts and covered calls with guidance.

Emphasize that you don't need to memorize everything now; this course serves as a starting place for options concepts, with focus on selling cash-secured puts and selling covered calls.

Compare stocks and options by understanding that stocks are ownership you can buy, sell, and hold, while options are expiration-date contracts with a strike price to buy or sell shares.

Discover how options contracts operate, including buying and selling contracts tied to stock, and the factors that affect their prices.

Selling options is the safest strategy for beginners, bringing cash into your account right away and letting you choose a strike price to control buying or selling stock.

for beginners, each option contract covers 100 shares and selling puts ties up capital. double-check orders to avoid accidentally trading 100 contracts, which can require 580,000 instead of 5,800.

Learn who is on the other side of options trades, how brokers, clearinghouse, and random assignment work, and why traders sell puts or calls to protect positions and generate cash.

Learn how options pricing uses the underlying stock price, expected movement, and time value. Buyers bid what the contract is worth, sellers ask a premium as expiration approaches.

Learn how options prices combine intrinsic value with extrinsic time value and how time decay erodes that extrinsic value as expiration approaches.

The lecture explains the four types of options contracts—buying and selling puts and calls—how writers and buyers take on obligations or rights, with strike price, expiration, and premiums.

Keep collateral in your account to back option contracts, covering 100-share obligations for puts and calls. Avoid margin calls and losses by maintaining cash or stock to secure these obligations.

Sell options instead of buying because buying can wipe out your investment; you can lose your shirt, and profits from luck are not typical, while small losses erase gains.

Avoid trading on margin or borrowed funds, which incur interest and tempt you to think you have more money than you do; it's a terrible idea.

Explore moneyness in options, comparing in the money and out of the money for calls and puts, and see how price relative to the strike at expiration shapes outcomes.

Options expire at market close with automatic broker settlement. If in the money, shares exchange at the strike price; you must hold collateral cash and 100 shares per call.

Understand what happens when a sold put expires: if out-of-the-money you keep the premium and release cash; if in-the-money you buy 100 shares at the strike price, keeping the premium.

Explain how a sold call expires in the money or out of the money and how the premium shapes the seller's outcome, including keeping the premium or delivering 100 shares.

Match your options goals with outcomes by using puts in the money to buy at your price or calls in the money to sell at your price.

Compare selling options to stock trades by picking strike prices, collecting upfront premium, and using puts and calls to control costs and reduce losses.

Sell puts to collect a premium by setting a strike price to buy stock. Mitigate risk by choosing high-quality stocks and strike prices you’d be happy owning if prices fall.

Selling a call commits you to selling stock at your strike price, earning a premium upfront while risking capped profits and the price rising above the strike, triggering assignment.

Explore complex spreads of calls and puts, involving buying, selling, and varied expiration dates, and learn why beginners should master simple single leg options first.

Request permission from your broker to trade options; a level is assigned by experience and risk. Start at the lowest privilege, upgrade later, and practice with Thinkorswim paper money.

Select a stock, strike, and expiration to enter your first options trade; learn cash-secured puts basics with a step-by-step path from order to expiration, including closing early to avoid assignment.