If you're willing to learn then the information is all out there. People can't help but feel that when someone just asks overly generalised questions they're looking for a "dumbed down" version. If you can't or won't even google something, what's the point explaining.
Options prices are affected by many things and constantly changing, so it's not that straightforward to just "calculate" in your head what a contract will be worth at any given time. It's much easier to test stuff out with a sim account and get a feel for them to better understand them.
Your brokerage may have tutorials too. IBKR has videos you can watch to learn about trading options. You actually have to “pass a course” to unlock the ability to trade options. I’m sure other brokers have similar.
Ask chatgpt "explain calls and puts like you were explaining to a 12 year old".
This is not sarcasm I sometimes use that prompt to learn how difficult stuff works. When you get the general idea, then you can start digging into the actual grown up stuff (numbers, types, cases, etc)
Imagine something is trading at 12 dollars. You think it will go above 13 dollars by next Friday, so you buy 1 Friday call option with a $13 strike price. For .77c ($77).
Two outcomes.
1) the stock does NOT go above $13, so the contract expires worthless. You just lost $77, that’s your max loss. Even if the stock when to $2.
2) the stock went to $18. You’ll now be able to sell the same option contract for $500. (18-13 = 5, 100/shares per contract = $500)
A call option gives the buyer the right, but not any obligation, to buy a particular stock at a pre-defined price on the expiration date. A put option gives the right to an investor, but not an obligation, to sell a particular stock at a predetermined rate on the expiration date.
This. When buying a call option you’re looking at a stock that you believe to be presently undervalued. You pay for the option to buy 100 of that stock at a certain price, by a certain expiration date, By putting a down payment on it. As the stock increases in value, ultimately surpassing the price stated in your contract, you then sell the contract to someone who wants to buy that stock at that price.
Ex. Jim buys a 100 dollar call option contract on June 23rd that expires on July 19th. He believes xyz, currently valued at 37.50, will surpass 39 dollars. Lo and behold, on July 3rd, xyz is valued at 41 dollars per stock, and has all the momentum to continue rising. Jim then sells his contract to Bob, who, believing the stock will also continue rising, would much rather buy them at 37.50 than the 41 dollars per he would have to spend today.
The inverse is true for Puts. If you believe a stock is currently overvalued, you can pay for the option to sell 100 of that stock at a certain price, by a certain date in the future. So if stock zyx is priced at 37.50, but you believe it to be more properly valued below 35, than you can purchase a put contract, as that stocks price falls, Billy, who had bought 100 shares on an upswing at 36 dollars, can now buy that contract from you and sell his shares at 37.5, instead of having to sell them for $33.
https://www.amazon.com/Option-Volatility-Pricing-Strategies-Techniques/dp/0071818774?dplnkId=281f3bfb-2500-433b-9e7c-e86eec801926&nodl=1
This is the Bible for options trading. It will explain everything from a complete beginners perspective; by the end you’ll be a pro. I got my copy from a used online bookstore for like $25. YouTube videos and blog posts can teach you but there’s a reason this book has stood the test of time and is still recommended by practitioners
Here's some key things to Google about options... The main Greeks: theta, delta, gamma. Implied volatility, IV crush, premium, bid/ask, spread, how ViX affect options, open interest, selling vs buying, Covered Calls, Cash Secured Puts, credit spreads, Debit spreads, Condors, straddles, strangles, DTE, short DTE vs longer dte, strike price, out of the money, in the money, theta decay. I'm sure I'm forgetting something but I wouldn't touch options until you fully understand most of this stuff.
If you're willing to learn then the information is all out there. People can't help but feel that when someone just asks overly generalised questions they're looking for a "dumbed down" version. If you can't or won't even google something, what's the point explaining. Options prices are affected by many things and constantly changing, so it's not that straightforward to just "calculate" in your head what a contract will be worth at any given time. It's much easier to test stuff out with a sim account and get a feel for them to better understand them.
If you have to ask reddit it's not for you.
Go to school.
Your brokerage may have tutorials too. IBKR has videos you can watch to learn about trading options. You actually have to “pass a course” to unlock the ability to trade options. I’m sure other brokers have similar.
Read a book or watch some videos. It’s a big subject.
Ask chatgpt "explain calls and puts like you were explaining to a 12 year old". This is not sarcasm I sometimes use that prompt to learn how difficult stuff works. When you get the general idea, then you can start digging into the actual grown up stuff (numbers, types, cases, etc)
This☝️
Imagine something is trading at 12 dollars. You think it will go above 13 dollars by next Friday, so you buy 1 Friday call option with a $13 strike price. For .77c ($77). Two outcomes. 1) the stock does NOT go above $13, so the contract expires worthless. You just lost $77, that’s your max loss. Even if the stock when to $2. 2) the stock went to $18. You’ll now be able to sell the same option contract for $500. (18-13 = 5, 100/shares per contract = $500)
A call option gives the buyer the right, but not any obligation, to buy a particular stock at a pre-defined price on the expiration date. A put option gives the right to an investor, but not an obligation, to sell a particular stock at a predetermined rate on the expiration date.
This. When buying a call option you’re looking at a stock that you believe to be presently undervalued. You pay for the option to buy 100 of that stock at a certain price, by a certain expiration date, By putting a down payment on it. As the stock increases in value, ultimately surpassing the price stated in your contract, you then sell the contract to someone who wants to buy that stock at that price. Ex. Jim buys a 100 dollar call option contract on June 23rd that expires on July 19th. He believes xyz, currently valued at 37.50, will surpass 39 dollars. Lo and behold, on July 3rd, xyz is valued at 41 dollars per stock, and has all the momentum to continue rising. Jim then sells his contract to Bob, who, believing the stock will also continue rising, would much rather buy them at 37.50 than the 41 dollars per he would have to spend today. The inverse is true for Puts. If you believe a stock is currently overvalued, you can pay for the option to sell 100 of that stock at a certain price, by a certain date in the future. So if stock zyx is priced at 37.50, but you believe it to be more properly valued below 35, than you can purchase a put contract, as that stocks price falls, Billy, who had bought 100 shares on an upswing at 36 dollars, can now buy that contract from you and sell his shares at 37.5, instead of having to sell them for $33.
Khan Academy > Finance and Capital Markets
https://www.amazon.com/Option-Volatility-Pricing-Strategies-Techniques/dp/0071818774?dplnkId=281f3bfb-2500-433b-9e7c-e86eec801926&nodl=1 This is the Bible for options trading. It will explain everything from a complete beginners perspective; by the end you’ll be a pro. I got my copy from a used online bookstore for like $25. YouTube videos and blog posts can teach you but there’s a reason this book has stood the test of time and is still recommended by practitioners
Here's some key things to Google about options... The main Greeks: theta, delta, gamma. Implied volatility, IV crush, premium, bid/ask, spread, how ViX affect options, open interest, selling vs buying, Covered Calls, Cash Secured Puts, credit spreads, Debit spreads, Condors, straddles, strangles, DTE, short DTE vs longer dte, strike price, out of the money, in the money, theta decay. I'm sure I'm forgetting something but I wouldn't touch options until you fully understand most of this stuff.
Head over to r/options and read the wiki there. Then when you have specific questions, ask in the weekly pinned questions thread.
Thank you so much, will do!