Options Trading Basics & Strategies Explained

Learn to trade options to profit from any market condition. Get free options trading education and training right here at The Options Guide. Master the basics and understand the various trading strategies by accessing our comprehensive library of options trading tutorials and articles online.

Options Basics:
What is an Option?

An option is a financial contract in which the holder has the right (but not the obligation) to buy or sell a specified quantity of a security at a specific price within a fixed period of time... [Read more...]

Advanced Concepts:
Understanding Index Options

Introduced in 1981, index options are options whose underlying is not a single stock but an index comprising many stocks. Index calls and puts allow investors to gain exposure.... [Read more...]

Options Strategy:
Investing in Growth Stocks using LEAPS®

If you are investing the Peter Lynch style, trying to predict the next multi-bagger, then you would want to find out more about LEAPS® and why I consider them to be a great option for investing in the next Microsoft®.... [Read more...]
Featured Article:
Bull Spread vs Covered Call

As an alternative to writing covered calls, one can enter a bull call spread for a similar profit potential but with significantly less capital requirement. In place of holding.... [Read more...]

Advanced Concepts:
Understanding the Greeks

In options trading, you may notice the use of certain greek alphabets when describing risks associated with various positions. They are known as "the greeks" and.... [Read more...]

Stock Investing 101:
Valuing Common Stock

Since the value of stock options depends on the price of the underlying stock, it is useful to calculate the fair value of the stock by using a technique known as discounted cash flow.... [Read more...]

Site Feature:
Strategy Search by Profit Graphs

Profit graphs are  visual representations of the possible outcomes of options strategies. Profit or loss are graphed on the vertical axis while the underlying stock price on expiration date is graphed on the horizontal axis.

A quick way to scan for option trading strategies is by using profit graphs....

Options Strategy:
Dividend Capture using Covered Calls

Some stocks pay generous dividends every quarter. You qualify for the dividend if you are holding on the shares before the ex-dividend date....[Read more...]

Options Strategy:
Leverage using Calls, Not Margin Calls

To achieve higher returns in the stock market, besides doing more homework on the companies you wish to buy, it is often necessary to take on higher risk. A most common way to do that is to buy stocks on margin....[Read more...]

Options Strategy:
Buying Straddles into Earnings

Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable. For instance, a sell off can occur even though the earnings report is good if investors had expected great results....[Read more...]

Options Strategy:
Writing Puts to Purchase Stocks

Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable. For instance, a sell off can occur even though the earnings report is good if investors had expected great results....[Read more...]

Options Trading:
Effect of Dividends on Option Pricing

Cash dividends issued by stocks have big impact on their option prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date....[Read more...]