This is an introduction to the world of options trading. At first, trading options can seem extremely complex. This beginners video explains the key aspects of options and offers two examples of their application. I hope this video serves as a starting point for your options trading journey. Best of luck!
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Hi everyone - this is matt from matchstraps in this video i'll, be giving you an introduction into the world of options trading. From first-hand experience i can tell you, options may seem overwhelming and complex at first, but once you figure out a handful of key points, they are actually easy to understand. My hope is that this guide helps you get one step closer to feeling comfortable with options trading when utilized properly options can generate income hedge market risk and offer advantages that trading stocks alone cannot an option. Is a contract giving the buyer the right, but not the obligation to buy or sell the underlying asset at a specific price on or before a certain date? Typically, the underlying asset is a stock or an etf options are known as derivatives because they derive their value from an underlying asset.

One option contract represents a hundred shares of the underlying asset. Due to this notable leverage, options should be traded with caution trading. This asset class can lead to both considerable gains and considerable losses. Options are not suitable for everyone.

The cost of an option is referred to as its premium. The premium value is greatly impacted by the strike price and the expiration date of the option contract. The strike price is the set price at which the contract can be exercised. The expiration date represents the last valid date of the contract.

There are two types of options. A call option gives the owner the right to buy a stock. On the other hand, a put option gives the owner the right to sell a stock to better illustrate these concepts. Let's explore some examples, let's say: there's a stock xyz, which is currently trading at 100.

You feel confident that the stock will be going up over the next six months. This prompts you to buy a call option for three dollars on xyz, with a strike price of 105 and an expiration date in half a year. This means when the contract expires. You have the right to buy 100 shares of xyz at 105 dollars per share.

Let's fast forward six months and say: xyz is trading at 120, any value above a hundred and five dollars would be referred to as being in the money. Since you have the right to buy the stock at 105 dollars, you would profit the current value of xyz 120 minus the strike price 105 minus the premium three dollars. Therefore, you would profit 1, 200 or 12 dollars per share multiplied by 100 shares. If xyz is trading at or below 105 dollars, when the option expires known as being out of the money, you will lose the full value of the premium three dollars times: 100 shares or 300 a put option would be the exact opposite.

Let's say: there's a stock zyx, which is currently trading at fifty dollars. You feel confident that the stock will be going down over the next three months. This prompts you to buy a put option on zyx with a strike price of 47 and an expiration date in a quarter of the year for one dollar, this means when the contract expires, you have the right to sell 100 shares of zyx at 47 per share. Let's fast forward three months and say: zyx is trading at forty dollars.
Any value below forty seven dollars would be referred to as being in the money. Since you have the right to sell the stock at forty seven dollars, you would profit the strike price. Forty seven dollars minus the current value of zyx forty dollars minus the premium one dollar. Therefore, you would profit six hundred dollars or six dollars per share, multiplied by 100 shares if zyx is trading at or above 47, when the option expires, as in it's out of the money, you will lose the full value of the premium, one dollar times 100 shares Or 100, i hope this video offered you a concise introduction to options trading.

I would highly suggest studying concepts such as selling options, option, greeks and the impact of volatility on option premiums to continue your options trading journey. Do you have any questions about options? Training? Let me know in the comments below i would love to hear from.

25 thoughts on “An introduction to options trading 2020 trading essentials”
  1. Avataaar/Circle Created with python_avatars Aaron Johnson says:

    I'm also interested in knowing which animation program you used to create this. Your videos have been very helpful in my return to learn options and get better.

  2. Avataaar/Circle Created with python_avatars HAIL YEAH says:

    This video could not have been made by the same Lime drawing, duck shirt wearing, tulip selling Kohrs that I stream daily 🥱🥱 REFRESH BRO!😎

  3. Avataaar/Circle Created with python_avatars Valentine says:

    Thanks now i actually understand better im try it out thanks for the inspiration you provide for us aps

  4. Avataaar/Circle Created with python_avatars Christopher Jones says:

    ❤️ You Brother. See you tomorrow 😊
    HODLING 1180 shares. Buying more tomorrow. Cheers from 🇨🇦
    😎💪💎🦍🔥🧲🦆🚀🌙

  5. Avataaar/Circle Created with python_avatars Trade with Nora says:

    Having a trading plan is essential for every trader. Trading with Mrs Monroe's platform and understanding its unique premise could help you formulate better your own trading plan.

  6. Avataaar/Circle Created with python_avatars Hola! Nicalicious says:

    Match, solid video. If you redid the voice over with your new experience, it would rock. Those graphics and sound effects are spot on!

  7. Avataaar/Circle Created with python_avatars Stephen Bendle says:

    Hello Matt I have been a Ape now since June 1, I was hoping you would be able to tell me where I can find more info on options and some of 5he best Apps that I can use. The App that I am using now dose not do options.

  8. Avataaar/Circle Created with python_avatars Nathan Prince says:

    So in order to get the money for the 105 call, you have to exercise the option and then sell the shares? Say if you bought 20 call options, but could only afford to buy 10 calls, can you buy 10, sell them, then purchase the next 10?

  9. Avataaar/Circle Created with python_avatars Rick Monroe says:

    Is it correct that you can decide to purchase 100 shares of the stock instead of taking the profit when trading options? And if you are out of the money you could buy the stock at that price instead of paying the penalty?

  10. Avataaar/Circle Created with python_avatars Jon Swanner says:

    Thank you for your time , this makes way more sense now! I'm looking for word to learning more about the stock market. I feel like if it wasn't for you and Trey, I feel like I would be in the dark!! So from a fellow ape, I say thank you!!!

  11. Avataaar/Circle Created with python_avatars Sean L says:

    Matt, thanks for making this a little bit clearer. Been following you for about 6 weeks always been afraid of options due to lack of knowledge. But I need a little gas for my AMC matches. So I bought a 70 and 73 strike expiring on 6-11. (I heard someone else say they did that earlier today.) Anyway, my question is if the price hits 100 (which I assume will put me in the money) on Tuesday or Wednesday can I exercise the option early if I so choose? Basically as soon as the option is in the money can I cash in if I think that is best time? Thanks for your time and thanks for sharing your knowledge with a couple of Apes!

  12. Avataaar/Circle Created with python_avatars simplespiral says:

    What I don't get is it gives you the right to buy the shares at the strike price if your call expires in the money. So the "profit" this and other videos speak of is only after you buy the shares and sell them immediately correct – so unrealized profit at that time. Also, you would have to have enough money in your account to buy 100 for each call when it expires, correct? Also, can you sell before it expires, and if you sell before it expires are you actually buying the 100 shares then?

  13. Avataaar/Circle Created with python_avatars Lyrical Logic says:

    You are a man of so many talents. This was most helpful and put together really well. I do get confused when you talk about “in the money” and “out the money”

    I think I get it now. I remember when you said “The Good Guys Win In The End”. That’s you my friend!

  14. Avataaar/Circle Created with python_avatars Topcat says:

    With a Call, or Put, you only risk losing the premium? Or would there be another risk besides a premium loss?

  15. Avataaar/Circle Created with python_avatars Lynn K says:

    I bought my first contract today. Just one to test the waters. So now that I have it, what can I do? Do I hold on right up to the expiry date? Can I sell earlier than that date, if so how? Do you have a video showing choices of selling with the order type, duration etc.? I really would love some clarification on this. I've been searching online, but have yet to find something that is easy to understand or explains the order entry choices on options at all. (Don't worry, if I lose, I won't be losing too much on this.)

  16. Avataaar/Circle Created with python_avatars P Danny says:

    When you exercise a call, do you need to have enough money to buy the 100 shares?
    Thank you.

  17. Avataaar/Circle Created with python_avatars slcdiablo666 says:

    Awesome video bro but you sometimes say we can roll it out further if its not in the money can you explain how to do that brother thank you see you Monday

  18. Avataaar/Circle Created with python_avatars 18inchestheComedian says:

    What are your long term investments. I am newish. I want to set up more than just Tesla for long term investments. All investments are my fault regardless if I buy similar stocks and or lose them. Thank you Matt.

  19. Avataaar/Circle Created with python_avatars 18inchestheComedian says:

    I am one step closer. I am still not confident in my knowledge about option trading. I will keep learning. I am a show me how and then I do what I learn. I am slow with retaining information as I get older. Thank you Matt for all of your knowledge. It is making me a better trader and investor. Cool beans 😎

  20. Avataaar/Circle Created with python_avatars Thomas Ebert says:

    so I bought in amc at an average price of approximately 13.50 a share. I bought like 170 shares so… I had a rough last few weeks. But i didnt wanna go out that way… so I held the stock. Since then ive been clawing my way back by investing money that I worked hard to earn… and you have been a really good learning resource for me. I really appreciate what youre doing. Youve been sincere and realistic and you actually do your fucking research and it’s awesome. Soon enough youll have millions of subscribers. Keep being you.

  21. Avataaar/Circle Created with python_avatars Taylor Sisco says:

    What happens if an option contract goes "in the money" for a little while but then goes "in the red" before expiration?

  22. Avataaar/Circle Created with python_avatars toni white says:

    I've watched and read things trying to explain options and I was left confused. I actually have a better grasp of what exactly options are now. Thank you, you did a fantastic job explaining it. To the moon

  23. Avataaar/Circle Created with python_avatars Fabian T says:

    Nicely put and not overly complicated. Ive been watching your live streams this last month. Ive traded but haven’t used options because I didn’t know squat. This is really helpful thanks!

  24. Avataaar/Circle Created with python_avatars Muhanad A says:

    This is so helpful thank you so much. I watched a 30 vid before this and understood nothing. God bless you, I will be watching this full options playlist. I’m sure it’s going to be very helpful as-well.

  25. Avataaar/Circle Created with python_avatars Susie Slezak says:

    Can you exercise your option before it expires or do you have to do it on the expiration date?

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