What an option is, strike prices, premiums, calls, puts, in and out of the money, time value, reading an option chain and leverage: options from scratch.
For: learners getting started with options (take "Stock Basics" first)
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
This course uses ideas from the courses below (optional; you can start right away).
More advanced courses that build on this one.
Pay a small amount now for the right to buy (or sell) at an agreed price later. Think of it like a deposit on a house.
Take apart an option contract and see what's written on it: underlying, type, strike price, expiration date, premium and multiplier.
Buying a call: pay a premium to lock in the right to buy at the strike. Drag the price at expiration and watch the payoff curve "bend".
Buying a put: the right to sell at the strike, like "insurance against a fall". The lower the stock goes, the more it's worth.
The seller of an option gets paid up front but takes on an obligation. Compare the risks of a short call and a short put.
Drag the stock price and watch a call and a put with the same strike flip between in the money and out of the money.
An option's price splits into two parts: what it's worth right now, and what it's worth because there's still time left.
That big T-shaped table in your trading app: strikes in the middle, calls on the left, puts on the right, each cell with a bid and an ask. Learn to pick out the contract you want.
One call costs a fraction of the stock price yet shares in the gains on 100 shares. But if the stock doesn't rise enough, it goes to zero. Compare the returns of buying stock vs. buying a call.