Part 2 Ride The Big Moves

What Are Options? The Basics

Options are derivative instruments, meaning their price depends on something else — the underlying asset. Each option contract has four key components:

Underlying Asset: The stock or index the option is based on.

Strike Price: The agreed-upon price at which the asset can be bought or sold.

Expiration Date: The date when the option contract ends.

Premium: The price paid to buy the option contract.

There are two main types of options:

Call Option: Gives the holder the right to buy the underlying asset at the strike price before or at expiration.

Put Option: Gives the holder the right to sell the underlying asset at the strike price before or at expiration.

If you buy a call, you expect the price of the underlying asset to go up.
If you buy a put, you expect it to go down.