Are you ready to start trading options?’
Then you’re in luck.
You’re about to get a 100% FREE crash course in options trading, comprised of 5 in-depth articles:
You’re going to understand how options work in the real world without understanding complex math or financial theory.
You’re going to understand vital concepts like implied volatility and time decay, and you’ll get 3 simple strategies that you can use to speculate on stock price movements.
Contrary to popular belief, options are actually not that complicated.
And they’re not inherently risky — you can take as much, or as little risk as you want.
Are you ready to start learning?
Let’s go!
What Are Options?
Derivatives are securities which are priced based upon the price of another security, like a stock, ETF, index, or commodity.
And options are the best-known form of derivatives.
In this series, we’re going to focus exclusively on options on stocks and ETF’s.
Options represent the right but not the obligation to buy or sell a certain stock at a certain price by a certain date.
And as the price of the underlying stock fluctuate, those rights change in value.
A sports betting analogy can help you understand this concept.
An option is at its most basic level a bet on a bet.
You’re betting that the value of the bet itself will change.
Let’s say it’s the start of the NFL season, and we think the Green Bay Packers will win the Super Bowl.
Options would allow us to bet that the value of a bet on the Packers to winning the Super Bowl will rise or fall.
If the Packers win their first 10 games in a row, that bet will be worth a lot of money.
But if they only win 5, it won’t.
Calls vs. Puts
Call options give a trader the right but not the obligation to buy a certain stock at a certain price by a certain date.
All things being equal, when a stock price rises, the price of a call option goes up.
Therefore, the buyer of the call option wants the price of the underlying stock to rise.
Put options give a trader the right but not the obligation to sell a certain stock at a certain price by a certain date.
All things being equal, when a stock price falls, the price of a put option goes up.
So the buyer of the put option wants the price of the underlying stock to fall.
Continue reading on T3 Live.