Options Trading for Beginners

Options can seem complex, but the basics are straightforward. This guide will get you started.

What Are Options?

Options are contracts that give you the right (but not obligation) to buy or sell a stock at a specific price before a certain date.

Call Options

  • Right to buy stock at strike price
  • You profit when stock goes up

    • Put Options

  • Right to sell stock at strike price
  • You profit when stock goes down

    • Key Terms

  • Strike Price: The price at which you can buy/sell
  • Premium: The cost of the option
  • Expiration: When the option expires
  • ITM: In the money (has intrinsic value)
  • OTM: Out of the money (no intrinsic value)
  • ATM: At the money (strike = stock price)

    • Safest Strategies for Beginners

    1. Covered Calls

    Sell calls against stock you own. Limited risk.

    2. Cash Secured Puts

    Sell puts with cash to buy shares. Defined risk.

    3. Buying Calls/Puts

    Limited to premium paid. Good for directional bets.

    Common Mistakes to Avoid

  • Starting with complex strategies - Master basics first
  • Ignoring the Greeks - Delta, theta matter
  • Not having an exit plan - Know when to close
  • Oversizing positions - Start small
  • Chasing premium - Quality over yield