No matter what I see or read options make zero sense to me I understand how the market moves so I’d like to do spy options but I just don’t get how they work please explain it like I’m 5 year old
When you sell a put option at a strike price you choose. You’re getting paid in exchange for your promise that if the price falls below that strike price by the time the option expires, you’ll buy 100 shares at the strike price.
When you sell a call option at a strike price you choose. You’re getting paid in exchange for your promise that if the price rises above that strike price by the time the option expires, you’ll sell 100 shares at the strike price.
In short, selling a put option is basically selling a promise to buy if a condition is met.
And selling a call option is basically selling a promise to sell if a condition is met.
ThatTradingMan on
Best thing you can do is focus your time and energy on getting better at analyzing and understanding charts and their chart patterns. Some pairs are more volatile than others. Some pairs move a lot in a little time, some pairs move a little in a lot of time. You have to be able to read, analyze, and understand chart patterns so you can know when to place a trade and when to exit a trade. That way you can trade anything that has a chart. No strategy is 100% so it’s best to try and be able to analyze and understand any chart you come across.
iownaford on
There are tons of explanation ELI5 videos on YouTube, if you can understand visual step by step learning I don’t you’ll grasp anything provided here.
And you’re not even 18 yet and you’re wanting to risk tens of thousands of dollars on SPY contracts?
heroyi on
You really shouldn’t be doing options because if you are having a hard time now then I have real bad news for you. Options are some of the most complex instruments in the financial world for a reason.
This isn’t necessarily a diss on you but a reality check that this stuff is difficult for a reason and anyone that says options are easy are either lying and/or being naive at best.
MrFyxet99 on
Please at least take some personal responsibility and at least research the basics, come back here with specific questions
Broad-Count-729 on
Are you scalping or swing trading?
TradeVue on
Think of options like buying or selling a ticket to bet on where a stock will be.
A call option is like a ticket that says you can buy SPY at a certain price later. If SPY goes higher, that ticket has value because you can buy it cheaper and sell it higher.
A put option is like a ticket that says you can sell SPY at a certain price later. If SPY goes lower, that ticket has value because you can sell it higher than what the market is offering
Each option has three parts. The strike price is simply the stock price you picked for your ticket like we talked about above . The expiration date is how long the ticket is good for. The premium is what you pay to have the ticket in the first place.
If the move happens before your ticket expires, the ticket is worth something. If not it expires worthless.
Striking-Block5985 on
An option is a bit like a price guarantee!
if you buy a CALL
you are guaranteeing a buy price, (strike you pick) , its a bit like locking in a mortgage rate on loan for 60days while you try to buy a home.
so if you pick a strike above the current price of the stock ( aka OTM) if it goes beyond that strike on exp date you get the stock cheaper (on exp date) than it is currently trading and make a profit by selling the stock you get assigned (if it goes up more than the premium, you paid) above the strike price . Some people buy options becasue they want to potentially buy the stock cheaper, but they only get that if the stock goes above the strike they pick. It s a way of having the chance to get the stock cheaper esp in a bull market, with much less risk than simply purchasing the stock and it drops away
Now here is the rub , you do not need to wait til the option expires, if it goes up enough before exp you can sell the option for a profit at any time you like
\
It works in reverse for puts
ExtremeAddict on
Calls = Coupons
Puts = Receipts
When the regular price is high, you take in your coupon and get a discount at the price it says on the coupon.
When the regular price is low, you take in your receipt and they’ll give you the money it says on the receipt.
When the regular price is already lower than the coupon price, the coupon is useless. Just buy regular price, it’s cheaper.
When the regular price is already higher than the receipt price, the receipt is useless. Just sell it at regular price, it’s higher.
# BTW: Do not trade real money until you can explain options to someone else in a manner they can understand and learn from you.
Gliese_667_Cc on
Bud, just buy an index fund. Most people who trade options shouldn’t. Like 95% of them. Especially people who have no idea what they’re doing.
Options are not a easy way to get rich. They certainly are an easy way to get poor.
boo_radley4 on
Spy options you’re talking big cash for puts and such. If you can’t understand anything about it yet don’t try real trading Get we bull and papertrade Gives you a mill in fake bucks to practice trading and options. I understand the market and it toook me a year of research, papertrading, and watching the market. I’m going for real this week with my first csp for ford and gonna do the wheel.
half-coldhalf-hot on
Study, read and watch videos until you understand it
SocraticGoats on
Sometimes I wonder who the hell would buy certain options I sell, then I read stuff like this and it reminds me of exactly who. OP type your question into chatgpt or google, then come back here with specific questions. That’s way to broad of a question…
poosebunger on
Why would you like to do spy options if options make zero sense to you? Don’t say leverage
ChairmanMeow1986 on
TLDR: Start with trading shares and see if you can time entries/exits while you learn how options work and how MM use them to be delta neutral and provide liquidity. Lastly beware FOMO, chasing, revenge trading, over trading.
Real help, first stop with options for now. You say you understand how the market moves so see if that correct by buying and selling shares first. Test if you can really pick exits and entries before adding leverage and the Greeks to it. At worst you’ll ended up invested in the S&P500, even with a down turn there’s worse places to be.
While your doing that you can spend time learning the basics of how first order Greeks work at least. Investopedia is free and lays things out very clearly, take notes if you have to. Plug in questions to GhapGPT or google. Grab a free Profit/Loss calculator and plug in numbers and play around with longer DTE’s/Strikes/ETC for some visual representation.
And lastly, know that your biggest issue buying (especially short dated) options is going to be your own mentality and discipline. Journal trades at the start, come up with rules at a minimum, and develop your guidance for entries/exit criteria. If you cant articulate to yourself why you are buying at certain point and haven’t thought about when/why and how you might exit if the trade turns you’re going to have a bad time eventually.
Queasy_Pollution8709 on
Check out [[option buddy](https://optionbuddy.ai/)] they are building a tool for investors like you. Breaking down “risk” which is the main thing you need to know in the game of options. With options everything else is basic and can be googled etc but the risk is really what you need to be focusing on.
-professor_plum- on
Don’t trade options. Have you ever taken calculus?
RMiers09 on
Most likely, you should stay away from options.
But if you do pursue learning options, make sure you get them down before you trade. Check out [tasty trade](https://tastytrade.com/learn/) for the basics. They have some really good stuff.
Also, alot of people start off by buying stupid options that are longshots. I started there too, but when I finally made the shift to selling options, I started seeing some real gains. If you want a niche resource that covers selling options specifically and using theta decay, check [out this one](https://thetathrottle.beehiiv.com/).
All this to say, it takes time to learn them and is probably not worth learning about for most people. Despite all the stuff you see online, they are not a hack to getting rich fast. Be careful and best of luck.
ReThinkingForMyself on
As I understand it, the first options contracts were for grain or other crops.
The price of grain at harvest time is uncertain when you plant the grain. If the summer has good weather, the sale price might be low because there is a lot of grain on the market. If the weather is bad, the price might be high because some crops are wiped out and supply is low. The stock market is the same. Prices are unpredictable.
Some farmers decided in the spring that it would be nice if they had a guaranteed price for their grain in the fall, at harvest time. This guarantee is worth some money. A high price guarantee is worth more than a low price guarantee.
Say the farmer buys a high price guarantee (a call option) in the spring and later, near the end of summer but before harvest time, he’s still guaranteed to sell at higher than the market price. This is worth some money, over and above the market price of the grain itself. If he wants to, the farmer can sell the guarantee to someone else now and still sell the grain later at harvest time.
So, there’s a market for not only the grain itself (AKA stocks) but also for buying and selling price guarantees (AKA options).
sharpetwo on
If options make zero sense to you, that is your signal not to trade them yet. They are leverage on top of leverage. You do not start with nitro if you have not yet learned to drive.
The whole game is comparing what the market thinks the move will be (implied volatility) versus what it actually is (realized volatility). Everything else (calls, puts, condors) is just packaging around that. If that core idea does not click, you are playing a game you cannot win.
Until then? The best *option* for you right now may very well be to DCA into SPY.
21 Comments
Tastylive.com
When you sell a put option at a strike price you choose. You’re getting paid in exchange for your promise that if the price falls below that strike price by the time the option expires, you’ll buy 100 shares at the strike price.
When you sell a call option at a strike price you choose. You’re getting paid in exchange for your promise that if the price rises above that strike price by the time the option expires, you’ll sell 100 shares at the strike price.
In short, selling a put option is basically selling a promise to buy if a condition is met.
And selling a call option is basically selling a promise to sell if a condition is met.
Best thing you can do is focus your time and energy on getting better at analyzing and understanding charts and their chart patterns. Some pairs are more volatile than others. Some pairs move a lot in a little time, some pairs move a little in a lot of time. You have to be able to read, analyze, and understand chart patterns so you can know when to place a trade and when to exit a trade. That way you can trade anything that has a chart. No strategy is 100% so it’s best to try and be able to analyze and understand any chart you come across.
There are tons of explanation ELI5 videos on YouTube, if you can understand visual step by step learning I don’t you’ll grasp anything provided here.
And you’re not even 18 yet and you’re wanting to risk tens of thousands of dollars on SPY contracts?
You really shouldn’t be doing options because if you are having a hard time now then I have real bad news for you. Options are some of the most complex instruments in the financial world for a reason.
This isn’t necessarily a diss on you but a reality check that this stuff is difficult for a reason and anyone that says options are easy are either lying and/or being naive at best.
Please at least take some personal responsibility and at least research the basics, come back here with specific questions
Are you scalping or swing trading?
Think of options like buying or selling a ticket to bet on where a stock will be.
A call option is like a ticket that says you can buy SPY at a certain price later. If SPY goes higher, that ticket has value because you can buy it cheaper and sell it higher.
A put option is like a ticket that says you can sell SPY at a certain price later. If SPY goes lower, that ticket has value because you can sell it higher than what the market is offering
Each option has three parts. The strike price is simply the stock price you picked for your ticket like we talked about above . The expiration date is how long the ticket is good for. The premium is what you pay to have the ticket in the first place.
If the move happens before your ticket expires, the ticket is worth something. If not it expires worthless.
An option is a bit like a price guarantee!
if you buy a CALL
you are guaranteeing a buy price, (strike you pick) , its a bit like locking in a mortgage rate on loan for 60days while you try to buy a home.
so if you pick a strike above the current price of the stock ( aka OTM) if it goes beyond that strike on exp date you get the stock cheaper (on exp date) than it is currently trading and make a profit by selling the stock you get assigned (if it goes up more than the premium, you paid) above the strike price . Some people buy options becasue they want to potentially buy the stock cheaper, but they only get that if the stock goes above the strike they pick. It s a way of having the chance to get the stock cheaper esp in a bull market, with much less risk than simply purchasing the stock and it drops away
Now here is the rub , you do not need to wait til the option expires, if it goes up enough before exp you can sell the option for a profit at any time you like
\
It works in reverse for puts
Calls = Coupons
Puts = Receipts
When the regular price is high, you take in your coupon and get a discount at the price it says on the coupon.
When the regular price is low, you take in your receipt and they’ll give you the money it says on the receipt.
When the regular price is already lower than the coupon price, the coupon is useless. Just buy regular price, it’s cheaper.
When the regular price is already higher than the receipt price, the receipt is useless. Just sell it at regular price, it’s higher.
# BTW: Do not trade real money until you can explain options to someone else in a manner they can understand and learn from you.
Bud, just buy an index fund. Most people who trade options shouldn’t. Like 95% of them. Especially people who have no idea what they’re doing.
Options are not a easy way to get rich. They certainly are an easy way to get poor.
Spy options you’re talking big cash for puts and such. If you can’t understand anything about it yet don’t try real trading Get we bull and papertrade Gives you a mill in fake bucks to practice trading and options. I understand the market and it toook me a year of research, papertrading, and watching the market. I’m going for real this week with my first csp for ford and gonna do the wheel.
Study, read and watch videos until you understand it
Sometimes I wonder who the hell would buy certain options I sell, then I read stuff like this and it reminds me of exactly who. OP type your question into chatgpt or google, then come back here with specific questions. That’s way to broad of a question…
Why would you like to do spy options if options make zero sense to you? Don’t say leverage
TLDR: Start with trading shares and see if you can time entries/exits while you learn how options work and how MM use them to be delta neutral and provide liquidity. Lastly beware FOMO, chasing, revenge trading, over trading.
Real help, first stop with options for now. You say you understand how the market moves so see if that correct by buying and selling shares first. Test if you can really pick exits and entries before adding leverage and the Greeks to it. At worst you’ll ended up invested in the S&P500, even with a down turn there’s worse places to be.
While your doing that you can spend time learning the basics of how first order Greeks work at least. Investopedia is free and lays things out very clearly, take notes if you have to. Plug in questions to GhapGPT or google. Grab a free Profit/Loss calculator and plug in numbers and play around with longer DTE’s/Strikes/ETC for some visual representation.
And lastly, know that your biggest issue buying (especially short dated) options is going to be your own mentality and discipline. Journal trades at the start, come up with rules at a minimum, and develop your guidance for entries/exit criteria. If you cant articulate to yourself why you are buying at certain point and haven’t thought about when/why and how you might exit if the trade turns you’re going to have a bad time eventually.
Check out [[option buddy](https://optionbuddy.ai/)] they are building a tool for investors like you. Breaking down “risk” which is the main thing you need to know in the game of options. With options everything else is basic and can be googled etc but the risk is really what you need to be focusing on.
Don’t trade options. Have you ever taken calculus?
Most likely, you should stay away from options.
But if you do pursue learning options, make sure you get them down before you trade. Check out [tasty trade](https://tastytrade.com/learn/) for the basics. They have some really good stuff.
Also, alot of people start off by buying stupid options that are longshots. I started there too, but when I finally made the shift to selling options, I started seeing some real gains. If you want a niche resource that covers selling options specifically and using theta decay, check [out this one](https://thetathrottle.beehiiv.com/).
All this to say, it takes time to learn them and is probably not worth learning about for most people. Despite all the stuff you see online, they are not a hack to getting rich fast. Be careful and best of luck.
As I understand it, the first options contracts were for grain or other crops.
The price of grain at harvest time is uncertain when you plant the grain. If the summer has good weather, the sale price might be low because there is a lot of grain on the market. If the weather is bad, the price might be high because some crops are wiped out and supply is low. The stock market is the same. Prices are unpredictable.
Some farmers decided in the spring that it would be nice if they had a guaranteed price for their grain in the fall, at harvest time. This guarantee is worth some money. A high price guarantee is worth more than a low price guarantee.
Say the farmer buys a high price guarantee (a call option) in the spring and later, near the end of summer but before harvest time, he’s still guaranteed to sell at higher than the market price. This is worth some money, over and above the market price of the grain itself. If he wants to, the farmer can sell the guarantee to someone else now and still sell the grain later at harvest time.
So, there’s a market for not only the grain itself (AKA stocks) but also for buying and selling price guarantees (AKA options).
If options make zero sense to you, that is your signal not to trade them yet. They are leverage on top of leverage. You do not start with nitro if you have not yet learned to drive.
The whole game is comparing what the market thinks the move will be (implied volatility) versus what it actually is (realized volatility). Everything else (calls, puts, condors) is just packaging around that. If that core idea does not click, you are playing a game you cannot win.
Until then? The best *option* for you right now may very well be to DCA into SPY.
Nothing wrong with that at all. Good luck.