nulll
Silver
- Joined
- Jan 21, 2023
- Posts
- 519
- Reputation
- 1,029
@Nims @currylightskin @Crusile @5'7 zoomer @pneumocystosis @House Lannister @curryboy123
If done correctly you can turn a 100 dollar account to a 10000 dollar account.
LESSON 1: HOW TO GET STARTED
The easiest way to open an options account for me personally is with Robinhood. The interface for options is very simple and good for beginners, and it is good if you want to learn about investing. Sign up with my link if you want.
LESSON 2: WHAT IS AN OPTION?
In simple terms, an option is an obligation to buy 100 shares or sell 100 shares of a stock at a given date. You however have to pay a premium for the option that you buy. Heres an example:
The only numbers that are important right now is the one on the far left and the one on the far right. The first number is the strike price which is the price that you will have to buy/sell 100 shares of the stock at when the option expires. The number on the right the premium for the stock, which is the price that you have to pay for the option itself.
Premiums
When you buy an option, you will have to buy the premium*100. You rarely have to wait until the option expires to make money, you rather make money by reselling the stock when the premium raises. Again, you do not have to wait until the option expires to make money.
Calls vs Puts
Every option is essentially a contract, or bet, between two parties. A call option states that the buyer of the call option predicts that the stock price will be above the strike price that they chose by the given option expiry date. Let me give an example:
Lets say that I believe that Amazon is going to be above $103 by feb 3. I would buy the option circled for a $4.30 premium, which will be multiplied by 100 to have a total cost of $430. When the stock price of Amazon rises, the premium that you paid for the option will also rise. There is a way that you see how much your premium will go up relative to the stock price, but that will be explained in a later section of the guide. For calls, if the stock rises, your premium rises. You can make money with calls by reselling the option at a higher premium than you paid.
A put is the opposite of a call. When the stock price goes down, the price of the premium goes up. Here's an example:
Lets say that I believe that the stock price of Amazon will be worth $100 by the end of feb 3. I would buy the premium for $284, and when the price goes down, your put's premium will increase in price.
In the money vs out of the money options:
Here is an example of an option that is in the money.
Since we are buying puts right now, the value of the option the arrow is pointing to is IN the money because the stock price has already gone lower than the strike price. ($104) This means that the option will have worth when it expires.
An out of the money option would be something like a put on img above with a strike price of $99. Out of the money options often experience larger percent gains/losses than In the Money options. Since the Out of the Money options have a lower price, a small change in their price can translate into large percent returns and volatility. Options that are deep in the money have premiums that are almost equal in percent change as the stock itself. If you have a smaller account and you are trying to grow it, Out of the money options will grow your small account faster.
Since this is a beginners guide, I would recommend you only buy calls/puts instead of selling them or doing spreads.
The Greeks
The Greeks are a very important set of values that will help you determine your chances of success on a particular option.
- Delta stands for the change in price of the option when compared to the change in price of the underlying stock. For call options, it will be between 0 and 1; for put options, it will be between 0 and -1. The closer to 1 or -1, the more likely that the price of that option will increase or decrease dollar for dollar as the stock price changes. If it’s at 0.5 or -0.5, it will increase or decrease by 50 cents for every dollar of change on the stock. The further in the money the option is, the higher its delta will be. The higher the delta, the more likely your option is going to finish in the money.
- The Gamma stands for the change in the delta of an option relative to the change in the price of the underlying stock. It tells you, therefore, what the rate of increase of the delta is. As a buyer, a high gamma is good assuming that your assumptions about what the underlying stock is going to do are correct.
- Theta stands for the change in the price of an option relative to how much time is left until it expires. It is directly related to the time value and will decrease as that value does. You want a low theta risk with options more than 90 days before expiration if you are long on your position because you don’t want the time value to drop. You want a high theta if you are short with options less than 30 days to deadline. (long = buy short = sell)
-Vega stands for the change in price relative to the option’s change in volatility. Premiums increase with volatility so vega will, too. Specifically, it will tell you how every 1 percent point change in the implied volatility affects the premium. If the volatility drops or disappears altogether, it’s possible that your option could lose value, so, vega is important to keep an eye on.
If this is difficult to understand, watch this video.
Lesson 3: Technical/Fundamental Analysis
Now that you know the basics of options, its time to learn how to make some money.
Fundamental Analysis
Fundamental analysis is the process of determining a stock's "fair value". This step is easy, you mostly have to look on the internet for different analyst opinions on sites like seeking alpha, morningstar, and yahoo finance. You should also check for important news or innovations that the stock has made. Another easy way to make money is by seeing what companies have their quarterly earnings reports, and making a decision on whether they will perform good or bad. This can be done with the methods stated before.
Technical Analysis
Technical Analysis is the process of determining a future stock price by past market data. The first and most important step is to go Tradingview, make an account, and look at the stocks using the site.
Reading candlesticks
Hopefully by now you're on tradingview and you picked a stock. If you dont know how to turn candlesticks on, theres an image showing where the button is down below.
The first thing you need to know about candlesticks and technical analysis is that it does not work 100 percent of the time. This should be paired with a fair fundamental analysis of the stock before you make an options trade.
Basic candlestick patterns
Once you trade for longer, you will be able to recognize and trade using these patterns more.
While you can learn all of these, if you are too lazy and want an easy way to use technical analysis, follow these steps:
1. Click the indicators button on tradingview
2. Search in indicators: "Strat assistant" and click "Strat assistant" and "Strat assistant Highs and Lows"
3. Use this video in order to learn how to use these indicators.
This concludes the end of my guide. If you have any questions, PM me or reply to thread.
If done correctly you can turn a 100 dollar account to a 10000 dollar account.
LESSON 1: HOW TO GET STARTED
The easiest way to open an options account for me personally is with Robinhood. The interface for options is very simple and good for beginners, and it is good if you want to learn about investing. Sign up with my link if you want.
LESSON 2: WHAT IS AN OPTION?
In simple terms, an option is an obligation to buy 100 shares or sell 100 shares of a stock at a given date. You however have to pay a premium for the option that you buy. Heres an example:
The only numbers that are important right now is the one on the far left and the one on the far right. The first number is the strike price which is the price that you will have to buy/sell 100 shares of the stock at when the option expires. The number on the right the premium for the stock, which is the price that you have to pay for the option itself.
Premiums
When you buy an option, you will have to buy the premium*100. You rarely have to wait until the option expires to make money, you rather make money by reselling the stock when the premium raises. Again, you do not have to wait until the option expires to make money.
Calls vs Puts
Every option is essentially a contract, or bet, between two parties. A call option states that the buyer of the call option predicts that the stock price will be above the strike price that they chose by the given option expiry date. Let me give an example:
Lets say that I believe that Amazon is going to be above $103 by feb 3. I would buy the option circled for a $4.30 premium, which will be multiplied by 100 to have a total cost of $430. When the stock price of Amazon rises, the premium that you paid for the option will also rise. There is a way that you see how much your premium will go up relative to the stock price, but that will be explained in a later section of the guide. For calls, if the stock rises, your premium rises. You can make money with calls by reselling the option at a higher premium than you paid.
A put is the opposite of a call. When the stock price goes down, the price of the premium goes up. Here's an example:
Lets say that I believe that the stock price of Amazon will be worth $100 by the end of feb 3. I would buy the premium for $284, and when the price goes down, your put's premium will increase in price.
In the money vs out of the money options:
Here is an example of an option that is in the money.
Since we are buying puts right now, the value of the option the arrow is pointing to is IN the money because the stock price has already gone lower than the strike price. ($104) This means that the option will have worth when it expires.
An out of the money option would be something like a put on img above with a strike price of $99. Out of the money options often experience larger percent gains/losses than In the Money options. Since the Out of the Money options have a lower price, a small change in their price can translate into large percent returns and volatility. Options that are deep in the money have premiums that are almost equal in percent change as the stock itself. If you have a smaller account and you are trying to grow it, Out of the money options will grow your small account faster.
Since this is a beginners guide, I would recommend you only buy calls/puts instead of selling them or doing spreads.
The Greeks
The Greeks are a very important set of values that will help you determine your chances of success on a particular option.
| Name | Dependent Var | Independent Var |
| Delta | Option price | Value of underlying asset |
| Gamma | Delta | Value of underlying asset |
| Vega | Option price | Volatility |
| Theta | Option price | Time to maturity |
| Rho | Option price | Interest rate |
- Delta stands for the change in price of the option when compared to the change in price of the underlying stock. For call options, it will be between 0 and 1; for put options, it will be between 0 and -1. The closer to 1 or -1, the more likely that the price of that option will increase or decrease dollar for dollar as the stock price changes. If it’s at 0.5 or -0.5, it will increase or decrease by 50 cents for every dollar of change on the stock. The further in the money the option is, the higher its delta will be. The higher the delta, the more likely your option is going to finish in the money.
- The Gamma stands for the change in the delta of an option relative to the change in the price of the underlying stock. It tells you, therefore, what the rate of increase of the delta is. As a buyer, a high gamma is good assuming that your assumptions about what the underlying stock is going to do are correct.
- Theta stands for the change in the price of an option relative to how much time is left until it expires. It is directly related to the time value and will decrease as that value does. You want a low theta risk with options more than 90 days before expiration if you are long on your position because you don’t want the time value to drop. You want a high theta if you are short with options less than 30 days to deadline. (long = buy short = sell)
-Vega stands for the change in price relative to the option’s change in volatility. Premiums increase with volatility so vega will, too. Specifically, it will tell you how every 1 percent point change in the implied volatility affects the premium. If the volatility drops or disappears altogether, it’s possible that your option could lose value, so, vega is important to keep an eye on.
If this is difficult to understand, watch this video.
Lesson 3: Technical/Fundamental Analysis
Now that you know the basics of options, its time to learn how to make some money.
Fundamental Analysis
Fundamental analysis is the process of determining a stock's "fair value". This step is easy, you mostly have to look on the internet for different analyst opinions on sites like seeking alpha, morningstar, and yahoo finance. You should also check for important news or innovations that the stock has made. Another easy way to make money is by seeing what companies have their quarterly earnings reports, and making a decision on whether they will perform good or bad. This can be done with the methods stated before.
Technical Analysis
Technical Analysis is the process of determining a future stock price by past market data. The first and most important step is to go Tradingview, make an account, and look at the stocks using the site.
Reading candlesticks
Hopefully by now you're on tradingview and you picked a stock. If you dont know how to turn candlesticks on, theres an image showing where the button is down below.
The first thing you need to know about candlesticks and technical analysis is that it does not work 100 percent of the time. This should be paired with a fair fundamental analysis of the stock before you make an options trade.
Basic candlestick patterns
Once you trade for longer, you will be able to recognize and trade using these patterns more.
While you can learn all of these, if you are too lazy and want an easy way to use technical analysis, follow these steps:
1. Click the indicators button on tradingview
2. Search in indicators: "Strat assistant" and click "Strat assistant" and "Strat assistant Highs and Lows"
3. Use this video in order to learn how to use these indicators.
This concludes the end of my guide. If you have any questions, PM me or reply to thread.
Last edited:
