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Options Academy

Understand options, how they're priced, and their risks.

17 lessons · about 74 minutes

  1. Options in 3 minutesThe quick tour before your first options contest.
  2. What are options?Contracts that give the right, not the obligation, to buy or sell.
  3. Calls vs. putsWhich way each one gains, with an interactive payoff chart.
  4. Strike price and expirationThe two numbers that define every option.
  5. What makes up an option's priceIntrinsic value and time value.
  6. In, at, and out of the moneyWhere the stock is relative to the strike.
  7. Reading an options chainThe table of strikes, prices, and activity.
  8. Buying calls: the payoffLimited loss, upside beyond the break-even.
  9. Buying puts: the payoffGaining when a stock falls, and puts as protection.
  10. Buying vs. selling an optionPaying a premium versus collecting one, and why selling carries more risk.
  11. Vertical spreadsPair a bought and a sold option to cap both risk and reward: debit vs. credit.
  12. Reading the pick ticketStrike, expiration, cost, breakeven, and the most a position can gain and lose.
  13. Time decayWhy options lose value as the clock runs.
  14. Implied volatilityThe market's expectation of future moves, built into prices.
  15. The Greeks: delta, gamma, theta, and vegaFour numbers that describe how an option's price reacts.
  16. The risks of optionsLeverage, expiring worthless, and selling risk.
  17. Covered calls and protective putsTwo common ways options are paired with shares.