Alright, here is the Options Thread many of you have inquired about

Many of you already understand how to buy and sell individual stocks, but few are still understanding how options work

Let me help you better understand

👇Buying Stock Options THREAD👇

Stock options, put simply, are the ability to BUY or SELL a specific number of shares of a stock at an agreed upon price on an agreed upon date

The agreed upon price is known as the "Strike Price"

The agreed upon date is known as the "Expiration Date"

There are different types of option contracts

1) Call Options
2) Put Options

Each option contract is sold for a specific price called a "Premium"

1 Option Contract = 100 shares

Let's look at a real example

Let's use $AAPL for our example

June 18, 2021 $140 call = $8.85

Expiration Date = June 18, 2021
Strike Price = $140
Premium = $8.85

This means as a buyer, you would pay $885 ($8.85 x 100 shares) for this option to buy $AAPL shares for $140 by June 18, 2021

Shares of $AAPL today trade at $129, so exercising that option would not make sense, but you believe the share price will increase beyond $140 before your expiration date of June 18,2021, which is why you are buying the option

Let's say at expiration $AAPL is trading at $160. In this case you would exercise your option

You are buying 100 shares for $140 (strike price)

Those 100 shares today are worth $16K ($160 x 100 shares)

Profit = $16K-$14K - $885

You made $1,115 on the initial $885 invested

If the price of $AAPL remains below $140, you essentially lose your premium of $885

The option contract is a RIGHT to buy (CALL) or a RIGHT to sell (PUT) shares of a specific stock at a later date

Options trade daily and the price action is usually much more volatile than the regular stock

Many option traders trade the option contract before expiration

Today shares of $AAPL decreased 2.3%
Today that call option we looked at decreased 10.2%

The opposite goes for Put Options

These types of contracts are purchased when you believe the underlying price of a stock will decrease

Let's use $AAPL again

June 18, 2021 $120 Put = $8.90

Premium = $8.90
Strike = $120
Expiration = June 18, 2021

In this situation the option holder will pay $890 ($8.90 x 100 shares) and the contract will increase as the price of $AAPL drops

As I mentioned, $AAPL stock fell 2.3% today but this put option actually increased 16.6%

If the stock stays above $120, you will lose your premium paid of $890

If the stock moves below $120, to say $110, you can exercise your option, which in this case would be SELLING 100 shares at $120 (STRIKE), so a $10/share profit x 100 shares = $1,000 Profit

Conclusion: Buying call options is usually someone that is bullish on a stock

Buying Put options is someone that is bearish on a stock

Stock Options come with added risk due to there volatility, so one should proceed with caution and fully understand before trading options
Feel free to DM me with any questions you may have

Best of luck!

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