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Options Crash Course

Options Crash Course: Ep #1 - The Source of All Strategies

Options Crash Course

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

In Episode #1 of our Options Crash Course, we trace everything back to the source - the option contract. Inside of an option contract between the long side and the short side, the strike price, expiration date, underlying stock, and quantity are all fixed, whereas the price of the contract itself is floating.

Then we take a look at the transaction itself, which is facilitated by the market maker, or counterparty. The market maker stands ready to buy at the bid price or sell at the ask price, and serve as the other side to any order we might want to execute.

Lastly, we move through the four basic option types: long call, short call, long put, and short put, with the gimmes and gotchas presented for each.

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