Session 1: The Basics covers a detailed introduction to options trading, focusing on the fundamentals of options such as the impact of time, strike prices, and how options are valued. It provides a thorough explanation using metaphors, like the concept of buying a safe with unknown contents, to illustrate how options pricing works.
Session 1: The Basics
Topics Covered in this session:
- Buying a Safe: A Thought Experiment to Understand Options
- Buying a Stock for a certain price, by a certain time: Understanding Calls
- Time is Money: The effect of time on the value of an option
- Where to Strike: Moneyness and understanding the right to buy a stock at different values
- The value of a call: Summarizing the pieces of a call’s value
- Trading Plans: Reasons to buy a call
- Flip Side: Selling a call
- Put a Ceiling on your Stock: Covered Calls
- Stock Insurance: Puts Part 1
- Shorting with fixed downside: Puts Part 2
- Getting paid for your stock buy-limit order : Puts Part 3
- Summary: The components of an option’s value, Calls vs Puts