Put and Call Options: An Introduction
Learn what call options are, what a put is, and how to make money with option trading. It's easy, if you understand the basics.
This introduction to calls and puts is written by an experienced trader and is full of tips that will help you make money trading options. It is full of examples showing actual trading wins (and a few losses) from trading.
Call option and put option trading is easier and can be more profitable than most people think. If you have never traded them before, then this website is designed for you. Not only is option trading easy to learn, but trading options should be part of every investor's strategy.
This introduction to puts and calls provides all the definitions, explanations, examples, and real-life trading tips needed to help the beginner trader learn to trade them successfully! If you keep reading you will learn the basic strategies to help maximize your gains and minimize you losses.
Long Call Example
Trading Put and call options provides an excellent way to lock in profits, maximize gains on short terms stock movements, reduce overall portfolio risk, and provide additional income streams. Best of all, trading them can be profitable in bull markets, bear markets, and sideways markets. If you are trading stocks but you are not using protective puts, buying a call, or if you have never sold a covered call option, then you are not making as much money as you can and you are missing out on some nice profits. The recent volatility in the stock market has provided unusually profitable opportunities. While stock traders generally dislike volatility, option traders love volatility because it's easier to make profitable trades when the markets are moving up and down every day.
Once the average investor has reached a comfort level trading stocks, then he should begin learning about put and call options and how to trade them. Then, once he understands the basics and how to trade them successfully, then he should implement them in his regular trading and portfolio management strategy and watch his profits increase.
The beginning put and call option trader, however, often finds it difficult to transition from trading stocks to trading options because there is some new terminology and it requires a slightly different way to think about price movements. But trading them is easier than you might think--provided you start with learning the basics. This website is for exactly that: teaching you the basics.
Any successful trader should be implementing a strategy that includes both stocks and options. Why are put and call options important? Trading them is important because they allow you to make more money than trading just stocks! There is a time for trading stocks and there is a time for trading options. But most of the time you should be trading all three! Keep reading through this website to learn the top 10 things you need to know before your start trading.
Understanding put and call option trading is easy if you commit a little time to reading the following pages that describe in a very clear and concise manner the important definitions and concepts you must learn. This site provides lots of examples, and my personal tips. As an experienced stock investor, option trader, and a life-long educator, I created this website to introduce and explain my trading knowledge to the average investor.
If you don't have the basic understanding of options trading, however, it can also be very expensive. Because of the short life of an option, profits and losses can add up quickly. The typical stock investor that starts trading options usually does not have a good understanding of the forces at work, they lose money on their first few trades, and then they throw their hands up in the air and say "It's too confusing--never again." Keep reading so this doesn't happen to you!
Long Put Example
It is like everything else--you must commit a little time to understand the basics. Then once you start understanding it you will make some money at it. And once you start making a little money at it, then you will start enjoying it and look forward to the stock market opening every morning.
I have already helped thousands of people understand what a option is and how to trade them. I have written this Introduction to Call and Put to help you learn what they are, and to show you how easy it is to trade them.
If you read sequentially through the links in the Table of Contents on the top right side of this page, in less than 60 minutes you will have a very clear understanding of:
- What are stock options?
- What is a call option?
- What is a put option?
- My Top 10 Option Trade Tips
- Option value and pricing
- How to buy a call
- Who is the Best Option Broker
- How to write a covered call option
I made my first call trade in 1985 and have been trading call & put options ever since. I have an MBA in Finance, I have read dozens of the best books, I have subscribed to several of the best newsletters, I have used many of the best discount brokers websites, and I have made thousands of trades in my lifetime.
Now, with this website, I am going to share with you all of my 29 years of experience trading call and put, of looking for the best, of knowing when to take profits and when to let them run, and unfortunately for me but good for you, I will also show you some of the biggest trade mistakes I made.
Getting Started Trading Options
First of all, let's talk about what you need to start trading:
- Read all the way through the Table of Contents on this web site
- Practice trading on a virtual trading platform
- Open a discount brokerage account, see my recommended list of best option brokers
- You don't need a lot of money, but you need at least $1,000 to get started
- You need to have an idea about the future direction of a stock or index
- You need to be able to do just a little bit of math
If you can do these things, then you have what it takes to make your first trade.
Here are the top 10 option concepts you should understand before making your first real trade: