AI Stock Picks

Options Trading Fundamentals

New to options? Start here! This guide covers everything you need to know before placing your first trade. No prior experience required.

Beginner's Learning Path

Fundamentals → Strategies → Practice Trading

Step 1 of 3

Start Here

Understanding the basics is crucial before you start trading. Take your time with each concept - clicking on each card will reveal more details and examples.

What is an Option?

A contract that gives you the right (not obligation) to buy or sell a stock at a specific price.

Call Options

The right to BUY a stock at the strike price before expiration.

Put Options

The right to SELL a stock at the strike price before expiration.

Calls vs Puts: Quick Comparison

CALL Options

Right to BUY at strike price
Profit when stock goes UP
Bullish outlook
ITM when stock > strike

PUT Options

Right to SELL at strike price
Profit when stock goes DOWN
Bearish outlook
ITM when stock < strike

Example: Your First Call Option Trade

Let's walk through a simple call option trade step by step

Setup: AAPL is trading at $175

You believe Apple will rise in the next month.

Buy: 1 AAPL $180 Call expiring in 30 days for $3.00 premium

Your cost: $300 (1 contract × 100 shares × $3.00)

Scenario A: AAPL rises to $195

Your call is now worth at least $15 ($195 - $180 strike). Profit: ($15 - $3) × 100 = $1,200 (400% return!)

Scenario B: AAPL stays at $175

Your call expires worthless (OTM). Loss: -$300 (100% of premium)

Key Insight: Notice the asymmetric risk/reward - you can make 400%+ but only lose 100% of the premium. However, options expire, so you need to be right about both direction AND timing.

Preview: The Greeks (Advanced)

These measure how options prices change - you'll learn more in the strategies section

Delta

Price sensitivity

Gamma

Delta's rate of change

Theta

Time decay

Vega

Volatility sensitivity

Ready for the Next Step?

Now that you understand the basics, learn about specific trading strategies.