I’ve done countless searches for videos on options trading for beginners.. all confusing because everyone is so animated and have their YouTube personality they have to fulfill at the same time.. frustrating.
I tried reading about it, but without visuals I can’t seem to grasp every aspect of it especially selling call options and how contracts expire worthless and when to sell.
Does anyone know of a good video I can learn from that the person is attentive on the teaching side and not so much being a clown?
I appreciate in advance.
In: Economics
Please at least read “options, futures and other derivatives” by John C. Hull, if nothing else . It’s the least you can do before touching an option, if you are a rational investor and prefer more money to less. Options are not like stocks and their pricing and risk behavior is somewhat complicated
DO NOT TRADE OPTIONS IF YOU ARE A BEGINNER.
One must fully understand the concepts and have money which they may burn. You could lose a tremendous amount of money if you don’t know what you’re doing. You could also lose a tremendous amount of money if you know what you’re doing and the market turns against you.
To explain to a 5 year old:
Buying an option is me paying somebody money (a premium) to let me take control of a portion (in groups of 100) of stock that they own. I have a limited amount of time (expiration date) that I can sell those shares, and the longer I hold them the less value they have. The further away the expiration date, the more expensive the premium I have to pay (because it is giving me more time to make a profit). If it is a call option, I want the stock value to go up. If it is a put option, I want the stock value to go down. The person who lent me the shares ALWAYS gets to keep the premium that I gave them to let me control the shares. If I have a chance to profit then the person I borrowed from will not get their shares back since I sold the shares away to someone else. If I do not have a chance to profit, I just give the shares back to the original owner and but I lose out on the premium I paid them.
Basically, an option is you paying someone to borrow stock from them with the right to sell the stock, but you have a time limit to make any profit and the longer you wait to sell them the less money you’ll get. In theory, you can make significantly more money trading options because you are dealing with 100 shares at a time at the cost of only a premium. Of course, your risk is huge too because you could just be giving money away for nothing.
In short, do not mess with options. It is way more complicated than can what be explained to a 5 year old.
Watch this video: https://www.youtube.com/watch?v=MiybniIIvx0
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