In this lesson I will explain option trading so you can see why some people consistently double their money and others don't. This is Lesson 1 of Module 1 (the table of contents and video lessons are at the bottom of each lesson in this course).
You'll learn what I used to turn $600 into roughly $3,000 in a few days...
You'll see how you can have a large profit even if the stock moves only 1% in price...
And when you finish this module you'll have a complete understanding of how to make money with options trading...
If you're frustrated with the technical and over-complicated online options trading tutorials, then I understand your frustrations.
I never found anyone to explain option trading in simple terms so I eventually pieced together my own definition and that's what I'm sharing with you today.
For the purposes of this lesson, I will only be referring to trading stock options, even though options can be traded on other securities such as commodities.
A stock option is not a physical thing like owning shares in a company. Instead, it's a contract between two parties.
When you own stock (or shares), you actually own a piece of the company. When the company's value goes up so does your shares price and then you have the opportunity to sell your stock shares at a higher price.
However, a stock option is an agreement, or a contract, where one party agrees to deliver something (stock shares) to another party within a specific time period and for a specific price.
So trading stock options is essentially the business of buying and selling contracts (stock option contracts).
Contract: an agreement made between two or more parties.
It is no different than the contract you sign to buy a house or a contract you have with a lawyer or musician. It's just a contract.
**NOTE**: I am only referring to the buying side of options trading. There is a way to make money by purely selling stock options, but I cover that in my more advanced options training.
If things are still fuzzy no worries, I'll explain option trading some more.
To gain a better understanding of how contracts can be traded for money, let's move on to an example of how you make money buying and selling contracts.
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