Understanding Options
Options are powerful financial instruments that give you the right — but not the obligation — to buy or sell a stock at a specific price before a certain date. This guide walks you through everything you need to know, with interactive tools to make the concepts click.
📖 What Are Options?
An option is a contract that gives the buyer the right (but not the obligation) to buy or sell 100 shares of a stock at a predetermined price (the strike price) on or before a specific date (the expiration date).
Think of it like a reservation at a restaurant. You pay a small fee to reserve a table (the premium). If you show up, you get the table at the agreed price. If you don't show up, you just lose the reservation fee — but you're not forced to eat there.
📈📉 Calls & Puts
There are only two types of options. Everything else is built from these two building blocks.
Gives you the right to BUY 100 shares at the strike price. You profit when the stock goes UP.
Stock rises to $190
Profit = ($190 - $180 - $3.50) × 100
= +$650 per contract
Gives you the right to SELL 100 shares at the strike price. You profit when the stock goes DOWN.
Stock falls to $160
Profit = ($170 - $160 - $2.80) × 100
= +$720 per contract
📊 Reading an Options Chain
An options chain shows all available contracts for a stock at different strike prices and expiration dates. The table below is a simplified live simulation. Click any call or put price to see what that contract means in plain English.
Drag the slider to move the stock price and watch how option prices change in real time.
| Call Price | Delta | Strike | IV% | Put Price |
|---|---|---|---|---|
| $17.11 | 0.87 | $160 | 31.9% | $1.45 |
| $12.85 | 0.80 | $165 | 29.6% | $2.17 |
| $8.95 | 0.69 | $170 | 27.3% | $3.25 |
| $5.6 | 0.54 | $175ATM | 25% | $4.88 |
| $3.92 | 0.39 | $180 | 27.3% | $8.18 |
| $2.82 | 0.28 | $185 | 29.6% | $12.06 |
| $2.1 | 0.20 | $190 | 31.9% | $16.32 |
⚡ The Greeks
The "Greeks" are measures that describe how an option's price changes in response to different factors. Click each Greek below to learn what it means and see a real example.
🧮 P&L Simulator
Drag the slider to simulate what happens to your profit or loss as the stock price changes at expiry. This example shows a long call: $175 strike, $5.50 premium, 1 contract.
🎯 Test Yourself
Answer these 6 questions to check your understanding. Each question has an explanation so you can learn from any mistakes.