Complete Guide to Options Trading

An option is a contract that gives you the right — but not the obligation — to buy (call) or sell (put) a stock at a specific price (strike) before a specific date (expiration). Options amplify returns but also amplify risk.

Calls vs Puts

• Call Option — Right to BUY at strike price. Profits when stock goes UP.
• Put Option — Right to SELL at strike price. Profits when stock goes DOWN.
• Premium — The price you pay for the option contract.
• Strike Price — The price at which you can buy/sell the underlying stock.
• Expiration — The date the option contract expires.

The Greeks

The Greeks measure how an option's price changes in response to different factors:

• Delta (Δ) — How much option price changes per $1 move in stock. Calls: 0 to 1, Puts: -1 to 0.
• Gamma (Γ) — Rate of change of delta. Higher near ATM and expiration.
• Theta (Θ) — Time decay. Options lose value every day, accelerating near expiration.
• Vega (ν) — Sensitivity to implied volatility. Higher IV = higher option price.

Common Strategies

• Covered Call — Own stock + sell call. Income strategy, caps upside.
• Protective Put — Own stock + buy put. Insurance against downside.
• Bull Call Spread — Buy call + sell higher call. Defined risk bullish bet.
• Iron Condor — Sell put spread + sell call spread. Profits from sideways movement.
• Straddle — Buy call + buy put at same strike. Profits from big move either direction.