Options Explained in Simple Words

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The Complete Options Trading Course (Updated 2021)

Profitable Options Trading Strategies For Trading Stock Options, Binary Options, Call & Put Using Technical Analysis

09:04:48 of on-demand video • Updated February 2021

  • Master The Most Profitable Options Trading Strategies With Real World Examples & Sample Trades
  • Dedicated Support from the Course Instructors and the Learning Community. 100% Questions Answered Within 24 Hours!
  • How to Build a Solid Strong Foundation For Options Trading
  • How to Read an Option Quote The Right Way
  • How to Buy and Sell Call & Put Options Profitably
  • How to Read Stock Charts Effectively to Identify Market Trends
  • How to Use Support & Resistance in Options Trading
  • How to Use MACD in Options Trading
  • How to Determine Bullish & Bearish Trends Using EMAs
  • How to Avoid Costly Trading Mistakes and Develop The Right Trader Mindset
  • How to Lower Your Risk and Maximize Your Profits
  • How to Trade Bullish Options Trading Strategies
  • How to Trade The Long Call Strategy
  • How to Trade The Covered Call Strategy
  • How to Trade The Synthetic Call Strategy
  • How to Trade The Bull Call Spread Strategy
  • How to Trade The Bull Put Spread Strategy
  • How to Trade Bearish Options Trading Strategies
  • How to Trade The Long Put Strategy
  • How to Trade The Covered Put Strategy
  • How to Trade The Synthetic Put Strategy
  • How to Trade The Bear Call Spread Strategy
  • How to Trade The Bear Put Spread Strategy
  • How to Trade Neutral Options Trading Strategies
  • How to Trade The Long Call Butterfly Strategy
  • How to Trade The Long Put Butterfly Strategy
  • How to Trade The Long Straddle Strategy
  • How to Trade The Long Strangle Strategy
  • And a lot more...
English [Auto] Everyone says Stephen welcome to the complete options training course. But what he has taken his course is meant for education only and nothing in this course is intended as a recommendation to buy or sell the specific security stop cryptocurrency or any other financial instrument. Now let's get to our first video on this course. Understanding options in simple words. In this video in the next couple of videos we're going to be going over what an option is in basic terms understands when trading options. Feel free to pause and replay the video at any time if you don't understand the term and there will be examples at the end of each video. It's extremely important that you understand these terms or you'll be lost when talk about trading options. So go as slowly as you need to. Through these videos you need to go through them more than once. That's fun. So what is an option. Options are defined by rights and obligations. If you own an option whether it's a call or we'll go in depth to know what to put in a call is if you own a putt or a call. Then you have the right to buy or sell a stock for a specific amount of time at a specific price. If you sell a book or call you have the obligation to buy or sell a stock for a specific amount of time at a specific price. All of the terms are included in the auction contract. So unlike the stock an option is an actual contract. The standardized contract that gives you either the rights if you own it or the obligation if you sell the contract or go through each of these in detail will bring him down so that you understand clearly what we're talking about. First let's look at how an auction is quoted. So go left to right the first piece of information is the symbol and that tells you what stock we're talking about here. We're using ABC and we're quoting options each option contract represents 100 shares of the underlying stock. The next piece of information is the date the option expires. Some stocks have weekly expirations and some stocks on one month. What next is the strike price of the stock. And that is the price at which what they call option you purchase the stock or the option you can sell the stock. The next piece of information is the type of option we're talking about whether it's a call or a calls are usually quoted on the left side of the screen as you'll see in our example the minute inputs are quoted on the right side. And finally the pre-meal. And that is the price of the option. If you're going to buy or sell the option this is the price which you will pay or get if you sell the option. And like stocks there's a bid ask what an option. And you'll see also the last trading price. As I said we'll look at a real example of what a quote script looks like in just a minute. Melts in the money options out of the money options and the money options are a start. And the money options and in the money call has a strike price which is below the current market value of the stock or is a put that has a strike price above the current market value of the stock. So let's take the example if I have a $25 stock and I have a call with a $15 strike and that call is in the money but it is also the price that the stock is trading at right now. But what if I have a $25 stock and I have a $30 that I haven't in the money put because it is above the current price of the stock and out of the money call as a call option with a strike but the current market value of the stock or a hook with a strike below the current market value of the stock. So a second example again we have a $25 stock. Now we have a 20 strike put there that is out of the money. If we have a twenty five dollar stock and a $30 call and that call is out of the money because it's about the current market value. And finally let's talk about the money options. Neither options will strike prices at or near the current market value of the stock. So if I have a stock is trading at twenty five dollars and 25 cents and I have a 25 strike call then that call is at the money a 26 strike call would also be considered at the money. So it's the options that are nearest and strike price to the current market value of the stock. Now was talking about intrinsic value and time value. Intrinsic value is the in the money portion of the options premium. So we were just talking about and in the money call it in the money. But let's use our same example we have a $25 stock and we have a 15 strike call and that gives us the right to buy the stock at $15. The intrinsic value of that call is $10. So it's the difference between the strike price and the current value the stock is trading at. So 25 which is the current market value minus 15 years is 10. So the intrinsic value for that call option is $10. Time value is an options premium or price minus the intrinsic value. The longer term option the higher the time value. So we have an option that's expiring in a week and let's use our same example we have a $25 stock and if the strike call option then it's likely that option is going to be trading around 10:50 or 10:24. $10 is the intrinsic value that 25 to 50 cents would be the time value. Using that same example we have an option that's going to expire in six months with a $25 stock and a 15 dollar strike option. The option will trade it at a much higher premium than the one we option. So for example you might have an option trading at 18 dollars. So you would have $10 of intrinsic value which is the 25 minus the 15. And then you would have an additional $3 or time value in that option which is what we're valuing that six months that is $3 for this particular option in this particular stock. Now let's take a look at options change and that's what they call a quote for an option. You look at the options change or look at that options change and walk through the definitions for each of these terms. Now take a look at the options change and talk about the various terms that we were going over the previous slides. This is the market watch site and there are several free sites you can use to get options quotes including the Nasdaq site in the CBOE the Chicago Board Options Exchange site also has free quotes. This is an option chain for Microsoft. We can see we have some more here. We have where the stock is currently trading and here on the left side our calls and on the right side are puts the calls to them. Boy are the options shaded in blue tarp and the money and the option shape not shaded or in white or out of the money. Here we have the date. These are the September 21 calls. These are the September 21. It's want to scroll down to get to the options that are trading near the current price of the stock. You see that 113 43 is the current price. So as I said all the blue shaded part in the money calls. So if we look with the stock trading at 113 110 call which is also the marquee value is in the money. But a 110 puts which is below the market value is out of the money. Most total though 120. So the 120 call is out of the money because it is trading above the market price but that 120 hooks is in the money because this trading about the market price and Dallas look at where each of those are trading. So we can talk about the intrinsic and time value. So the 1 10 call is trading 340 by 355 that 340 is the business 3:55 was the ass. So this option expires in one day. So we wouldn't expect much time value. So basically almost all of the value in this call is intrinsic value. So we take the 113 and subtract the 110 and that basically gives us 3:43 which is exactly around where this call is trading. There's no tie in value and this book was in such a short term option. Again expire in one day. But the puts they're treating the recent spike for sense because there is no intrinsic value and there's all lifetime value. But with a short time frame that's not much value there. It's the same thing when you look at the one 20's you're trading 645 by six sixty 65 because there is $6 and 43 cents of intrinsic value and then not much time value. And if we look at what 120 calls you'll see there a penny by any. There's basically no time value here and there's absolutely no intrinsic value the intrinsic value is zero. Sort of recap the calls in blue are in the money because their strike prices follow the market value it puts in white are out of the money as they are below the current market value. The calls in a white are out of the money because their strike is above the market value of the stock and that puts him blue in the money because their price is above the market value of the stock. Knowing one over intrinsic value and time value and the last thing are the half the money strikes in the here are the at the monies are the 113 and 114. And is just because they are trading very close to the price of the stock. So those are half the money strikes. So that sort of option chain looks like. And that's how to read an option change. Thank you for watching this video. And our next video we'll talk a little bit more about rights and obligations and what it means to buy and sell. And I call. I look forward to seeing you in the next video.