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Options Trading Basics Review

Options trading basics overview. Before we move on to Module 2 let's do a quick recap of Module 1.

Definition of Stock Options: If you buy or own a stock option contract it gives you the right, but not the obligation, to buy or sell shares of a stock at a set price on or before a give date (time period).

After this date, your contract expires and your option ceases to exist.

Derivatives are another name used for stock options.

Stock Options are contracts; they don't represent ownership in anything. They are merely contracts that grant you certain rights.

Options trading (the buying side) can be defined as buying contracts that you think will increase in value and once they increase in value you will sell them at a higher price and pocket the difference.

1 stock option contract = 100 shares of a company's stock. So when you buy 1 contract you are buying the right to, buy or sell, 100 shares of that stock.


Two Ways to Make Money with Stock Options: Puts and Calls

The "Put option" gives its buyer the right, but not the obligation, to "sell" shares of a stock at a specified price on or before a given date.

The "Call option" gives its buyer the right, but not the obligation, to "buy" shares of a stock at a specified price on or before a given date.

  • You buy a Call option when you think the price of the underlying stock is going to go up.
  • You buy a Put option when you think the price of the underlying stock is going to go down.

For trading purposes, Puts and Calls expire the 3rd Friday of the month of expiration. For example if I bought a December option, it will cease to exist (expire worthless) after the 3rd Friday in December.

That's it for Module 1: Options Trading Basics. You can proceed to Module 2: stock option valuation whenever you feel you are ready.


Message from Trader Travis: I don't know what has brought you to my page. Maybe you are interested in options to help you reduce the risk of your other stock market holdings.

Maybe you are looking for a way to generate a little additional income for retirement. Or maybe you've just heard about options, you're not sure what they are, and you want a simple step-by-step guide to understanding them and getting started with them.

I have no idea if options are even right for you, but I do promise to show you what has worked for me and the exact steps I've taken to use them to earn additional income, protect my investments, and to experience freedom in my life.

Just enter your best email below to claim my FREE report: Five Option Trading Strategies I've Used to Profit In Up, Down, and Sideways Markets...

Along with your FREE report, you'll also get my daily emails where I share my favorite option trading strategies, examples of the trades I'm currently in, and ways to protect your investments in any market.

 

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Products Created by Trader Travis

Options Trading Made Simple Book

Marketclub Options (offered via Marketclub)


Free Options Course Learning Modules

Module 1: Option Basics

Module 2: Option Value

Module 3: Basic Strategies

Module 4: Stock Charts

Module 5: Technical Indicators

Module 6: The 7-step process I use to trade stock options




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