Share
OwnershipOne share is one small piece of ownership in a company. Own 10 shares of Apple and you own 10 tiny slices of Apple. Shares are the thing options are built on top of.
Start here / the basement
Options trading, from the floor up.
Before profit comes understanding. This is the basement: the words, the pieces, and how they fit together. Read it slow. Nothing here is advice — it's the foundation.
The eight words you must own
Share Price
The StockWhat one single share costs right now on the open market. If NVIDIA trades at $180, the share price is $180. Options move because this number moves.
Strike Price
The Deal PriceThe price written into your contract — the price you get to buy at (call) or sell at (put), no matter where the stock actually goes. It's the line in the sand.
Premium
The CostWhat you pay to own the contract. Quoted per share, so a $2.00 premium on a 100-share contract costs $200. The premium is the most you can lose as a buyer.
Expiration Date
The ClockThe date the contract dies. After it, the rights are gone. Time is fuel: every day that passes, an option loses a little value. That's time decay.
Bullish
UpYou believe the price is going UP. The bull swings its horns upward. Bullish traders buy calls.
Bearish
DownYou believe the price is going DOWN. The bear swipes its paws downward. Bearish traders buy puts.
Contract
The AgreementA legal agreement between two people: one has the RIGHT to buy or sell, the other has the OBLIGATION to honor it. One contract controls 100 shares.
The one thing people get wrong
Read this twice
You do not own the stock. You own a contract.
When you buy an option, you are not buying 100 shares of the company. You are buying the rights to a contract — the right to buy or sell 100 shares at your strike price, before your expiration date. You get no dividends. You get no shareholder vote. You own paper with a deadline on it, and that paper controls 100 shares.
You can do three things with it: exercise it (actually buy or sell the 100 shares), sell the contract to someone else for more or less than you paid, or let it expire worthless and lose the premium.
Put it together
Example trade, broken down
- The stock
- NVIDIA (NVDA) trading at $180 per share
- Your view
- Bullish — you think it goes up
- The play
- Buy 1 call contract
- Strike price
- $190 — your locked-in buy price
- Expiration
- 60 days out
- Premium
- $4.00 per share x 100 shares = $400 total cost
- Controls
- 100 shares of NVDA — but you own none of them
- Max loss
- $400, the premium. That's it.
- If NVDA hits $210
- Your right to buy at $190 is now worth real money.
- If NVDA stays at $180
- Nobody wants the right to buy high. It expires worthless.