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
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.
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
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.
Δ
Delta
Price sensitivity
Γ
Gamma
Delta's rate of change
Θ
Theta
Time decay
V
Vega
Volatility sensitivity