Options contracts give you the right (but you are not forced) to buy or sell a certain number of shares of a stock at an agreed upon price before the contract's expiration. 

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Here are some of the basics of what the contracts do and how they work:

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--Contracts are groups of 100 shares. If I buy 3 contracts, it means that I plan to be trading 300 shares.

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--Exercising a contract means that you are using the right that is given to you by the contract. 

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--The strike price is the price that the options would be exercised at.

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--The premium is how much the writer charges for the contract. A $2.00 premium would mean that the person buying the option would be paying $200 for 1 contract. ​

 

 

 

There are 2 types of options. There are calls which give you the right to buy the shares off of the writer (the person who sold you the contract.) And there are puts. Puts give you the right to sell shares to the writer in the future.

 

You would want to buy calls if you believe that the price of the stock will go up. This is because you can get a discount on the price. You would want to buy puts if you believe that the price of the stock will go down. This is because you can sell the shares for higher than what you can if you sold on market. 

 

There are a few different kinds of trades with options:

Buy to open: This is when you buy a contract(s).

Sell to open: This is when you sell a new contract(s) and become the writer.

Buy to close: This is when you buy a contract(s) identical to the one you sold as a writer to cancel out your losses. 

Sell to close: This is when you sell a contract(s) that you already own to someone else.

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Options are very tricky. You can either make a ton or you lose your entire investment.

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