Learn Options Trading

A call option gives you the right to buy 100 shares at a specific price before a specific date. Learn how calls work, how you profit, and when to use them.

A call profits when the stock goes up. A put profits when the stock goes down. Learn the differences, when to use each, and common mistakes to avoid.

The Greeks tell you how an option's price changes when the stock moves, time passes, or volatility shifts. Learn what each Greek measures and how to use them.

At expiration, an option is either exercised or expires worthless. Learn about auto-exercise, assignment risk, and why most traders close before expiry.

Implied volatility is the market's forecast of how much a stock will move. Learn how IV affects option prices, what IV crush is, and how to use IV rank.

A spread combines two or more options to limit risk and reduce cost. Learn how debit and credit spreads work, when to use them, and how to read a spread's P/L.

A covered call generates income from stock you already own. Learn how it works, the risks, when to use it, and how to pick the right strike.

An iron condor profits when a stock stays in a range. Learn the four-leg structure, how to set strikes, max profit, max loss, and when to use it.

A long straddle profits when a stock makes a big move in either direction. Learn how it works, when to use it, and how to avoid the IV crush trap.

A cash-secured put generates income by selling the right to buy stock below the current price. Learn how it works, when to use it, and how to pick your strike.

Every option has an expiration date. Learn the difference between weekly and monthly expirations, how to choose the right one, and how expiration affects theta decay and risk.

Options premium is what you pay for a contract. Learn what drives the price — intrinsic value, time value, implied volatility — and why the same strike costs more before earnings.

An options chain shows every available strike and expiration for a stock. Learn what each column means, how to find liquid options, and how to use the chain to build a trade.

The strike price you choose controls your cost, breakeven, and probability of profit. Learn how in-the-money, at-the-money, and out-of-the-money strikes compare.

Theta measures how much an option loses each day from time alone. Learn how decay accelerates near expiration, and how to use it in your favor.

A bull put spread collects premium when you expect a stock to stay flat or rise. Learn the two-leg structure, max profit, max loss, and when to use it.

A bear call spread collects premium when you expect a stock to stay flat or fall. Learn the structure, max profit, max loss, and when to use it.

A long strangle profits from a big move in either direction. Cheaper than a straddle but needs a larger move to profit. Learn when and how to use it.

An iron butterfly collects maximum premium when the stock pins at your short strike. Tighter range than an iron condor, higher reward. Learn how it works.

A short strangle collects premium by selling an OTM call and put. Profit when the stock stays between your strikes. Learn the risks, mechanics, and when to use it.

A short straddle sells a call and put at the same strike, collecting maximum premium. Profit when the stock barely moves. Learn the mechanics, risks, and management.

A risk reversal combines a long call and short put (bullish) or short call and long put (bearish). Learn how it mimics stock ownership and when to use it.

A collar protects a stock position by buying a put and selling a call against it. Limits both downside and upside. Learn when and how to use it.

A butterfly spread profits when the stock lands at a specific price at expiration. Three strikes, defined risk, high reward if exactly right. Learn how it works.

Black-Scholes is the formula that prices every option in the market. Learn how it works, the history behind it, its assumptions, and why implied volatility is always quoted in Black-Scholes terms.

The binomial model prices options by building a tree of possible future stock prices. It handles American-style early exercise correctly — something Black-Scholes cannot. Learn how it works and when it matters.

Black-Scholes and the binomial model are the two foundational options pricing methods. They agree on most retail trades and differ on early exercise. Here is when each one is right.

Black-Scholes was designed for European options. US options are American-style. So why does OpCalc use it? Here is the complete, honest answer — including when it matters and when it does not.

Plain-English definitions of every term you'll encounter while trading options.