Options trading might seem complex at first. An option is a type of financial instrument that give the buyer the rightbut not the obligationqualcomm how to buy buy or sell an asset at a specific price within a set time frame.
There are two main types: call options and put options. A call option allows you to buy an asset at a set price, while a put option lets you sell it. Traders often use options to generate income.
Lets say you expect AAPL to rise. You might buy a call option with a strike price close to its current level. If the price goes above the strike before expiration, you can either hold it for leverage.
Beginners should understand key terms like:
- Strike Price: The set price you agree to buy/sell at.
- Expiration Date: The deadline for using the option.
- Premium: What you pay to buy the option.
Options carry risk. If the stock doesn’t move as expected, you could lose the premium. But your losses are limited to that costunlike shorting stocks, which can carry unlimited downside.
Popular platforms like Robinhood offer tools to learn options safely. Many brokers offer demo accounts where you can practice with paper trading before risking real money.
Start small, stick to basic strategies, and always avoid emotional trades. Options can be powerfulbut only when used wisely.
