Options Trading for Beginners: Calls, Puts, and Strategies Explained

Options Trading for Beginners

Options are contracts giving right (not obligation) to buy or sell stock at predetermined price. Call option gives right to buy - profits when stock price rises above strike price. Put option gives right to sell - profits when stock price falls below strike price. Option premium is the price paid to own option. Strike price is the predetermined price at which option can be exercised. Expiration date determines when option expires and becomes worthless. In-the-money options have intrinsic value. Out-of-the-money options have only time value. Long calls profit from stock price increases. Long puts profit from stock price decreases. Spreads combine multiple options to reduce cost and risk. Straddles profit from large price moves in either direction. Iron condors profit from stock price staying within range. Options leverage - control larger position with less capital. But leverage multiplies losses. Most options expire worthless. Education critical before trading options.