Options Education

The Place to Start

Basic Trading provides a brief introduction to some very fundamental concepts relevant to trading. If you are brand new to trading and to options, this section is a good place to start...

Option Anatomy provides a clear, concise explanation of what an equity option contract is and the components of which it is comprised. We talk about the rights granted to the option buyer and the obligations of the option seller. We also cover the typical jargon such as "in-the-money", "at-the-money" and "out-of-the-money"...

Option Behavior explains how implied volatility, time decay, and changes in the underlying stock price cause intrinsic value and time value to change.

  Options Ed Continued - Getting to the Good Stuff... 

Decision Making - Option trading is about cost and compensation for changing levels of risk. When speaking about cost and compensation for risk, there are three primary variables that apply...

Greeks - Delta, Gamma, Theta, and Vega.  Don't be put off by the arcane labels, these are valuable tools in the options business...

Spreads - When you combine two or more different option contracts to create a desired risk profile, you have created an option spread. Here we discuss four types of spreads: 1. Vertical Spreads 2. Time Spreads 3. Straddles & Strangles 4. Diagonal Spreads

In and Out - This column explains the alternative methods for exiting long and short option positions...

Synthetics - With synthetics, one can consider the combination of options and stock that most efficiently (i.e., economically) creates the desired P&L profile. Perhaps more important than efficiency is the fact that synthetics open your eyes to powerful trading alternatives. You can create an investment that matches your market outlook and risk tolerance precisely...