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Option Basics and Fundamentals

Here are Option Basics:
– Options are contracts
– You pay a premium for them
– You are able to buy or sell stock
– 1 option = 100 shares
– They expire the third Friday of the month you purchase them for
– Strike price = expiration price
– You pay a premium
– The option gets traded and sold versus the stock
– Most people just trade the contracts

Example:
– Think of options like buying a house
– You find a house that you like in an area where the houses are selling for $150k. You knock on the door and ask to buy the house. You are willing to give $10k upfront if the house is sold to you within 6 months for $200k.
– It is a win-win situation.
– The homeowner gets the $10k and you get the option to purchase the house in the future and you can do research to check if the area is actually developing.
– You have the right, but not the obligation to purchase the house. You pay $10k in order to have the option to buy it.
– If someone gave the homeowner a higher bid, the homeowner would not be able to sell the house because you have the legal right to buy it in the future for $200k.
– The homeowner would have to buy out the contract with you before selling the house for $300k.

Types of Options:
1. Call – You are expecting the stock to go up
2. Put – You are expecting the stock to go down

#optionbasics #optionfundamentals #stockoptions #tradingoptions

Posted at: https://tradersfly.com/blog/option-basics-and-fundamentals/

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Tradesfly is focused on me sharing my experience and knowledge about trading options. Although we include videos related to other areas of trading, the primary focus is trading options. If you are serious about learning to trade options for selling premium, creating spreads, be sure to subscribe to the channel and join our discord group.

🛑 DISCLAIMER
All of the stocks mentioned in this video along with any other videos we have are opinions and not investment, financial or legal advice. These videos are for general education, information, and entertainment. Do your own due diligence and consult with a registered financial advisor before taking any position since everyone has a different risk tolerance.

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