Options Trading for Beginners


What Are Options?

Options are a type of derivatives contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a set price on or before a certain date.

So Why Trade Options, Then?

Options are a popular investment vehicle among more experienced traders because there is an opportunity to make money.

Buying Calls (Long Calls)

When you buy a call option, you gain the right to purchase shares of a stock at the strike price before the expiration date.

Covered Calls

Covered calls are the other side of the call option transaction. A covered call is when an investor owns underlying security and then sells call options on them.

Long Straddles

If you’re unsure whether a stock will go up or down, but you’re convinced that it will experience a lot of short-term movement, employ the long straddle option trading strategy.

Buying Puts (Long Puts)

The term “long” can be confusing in this context, but it just refers to the act of the trader buying an option and hoping to profit from it in the future.

Short Put

Similar to a covered call, a short put is the other side of the transaction for long puts. The main difference is the level of risk.

Protective Puts

Traders still long on a stock or security but want to protect their downside may consider protective puts.