Class: Options Basics
Reference Materials
- Options - Essential Concepts & Trading Strategies, edited by The Options Institute, McGraw-Hill 1999: pages 1-57
- Options For The Stock Investor, James B. Bittman, McGraw-Hill 1997: pages 1-57
"Options Basics" (Options 101) will introduce you to the terminology, basic components, and mechanics of options. This class is designed for those who have little or no understanding of options and is designed to arm you with a basic entry-level understanding of options. At the conclusion of Options 101 and prior to the final quiz you should know and understand all concepts listed under the "What You Have Learned" tab.
Chapter 1 - Introduction
Introduces what an option is, a brief history of options, what rights the contract convey, and the mechanics of the physical delivery of options.
Chapter 2 - Terminology
The terminology chapter defines the two types of options, the difference between buying and selling options, and the exercise / assignment process.
Chapter 3 - The Options Revolution
This chapter further defines the components of an option, and then discusses the history of options, the participants in the market, and the domestic exchanges that list equity and index options.
Chapter 4 - Call and Put Specifics
In this chapter the differences between buying and selling calls and puts are displayed with an interactive graph. This chapter also gives instructive "what-if" scenarios for both long and short option positions.
Chapter 5 - Option Premium
For this chapter, option premium is defined and explained. The calculation of profit and loss is discussed, along with how an option is defined in relation to the underlying. This chapter also explains how to calculate the components of an option's value, and how the passage of time affects option premium.
Chapter 6 - Expiration, Exercise and Assignment
This chapter discusses the mechanics of exercising long options, the effect of assignment on a short option position, and how and when options cease trading due to monthly expiration.
Chapter 7 - Calls & Puts - Risk vs. Reward
In this chapter the student is given interactive charts that display profit and loss for the varying option positions.
Chapter 8 - Review and Quizzes
Review of what you have learned and final quizzes.