Beginner
Calls and puts from both sides of the contract
Begin with the four basic positions. A call or put describes a right, while buying or selling determines whether you hold that right or accept an...
Read articleFOLITIC / OPTIONS TRADING GUIDE
Options Trading Guide
Understand calls and puts, analyse option prices and build strategies for direction, income and protection. Follow ten stages from contract basics to advanced structures and disciplined trade management.
Start with Calls and puts from both sides of the contract, then follow the next lesson links. Explore 40 lessons with worked examples, exercises and further reading.
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Options Foundations
Understand calls, puts, premiums, contract specifications and the option chain.
Beginner
Strike price expiration and contract specifications
An option ticker is only the beginning. Read the strike, expiration, multiplier, exercise style and settlement method before calculating exposure.
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Beginner
Option premiums debits credits and expiration payoffs
Premium is the price of an option, not its potential profit. Learn to separate intrinsic value, time value and the cash direction of a trade.
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Beginner
Reading option chains liquidity and open interest
The option chain is a comparison table, not an execution promise. Use its quotes, activity and contract identifiers together.
Read articlePricing and Market Analysis
Connect Greeks, volatility and event risk with a testable market view.
Intermediate
Delta and gamma as changing price exposure
Delta measures local directional exposure. Gamma explains why that exposure changes as the underlying moves. Neither is a fixed forecast.
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Intermediate
Theta vega and rho beyond simple rules
Time, volatility and interest rates can change an option’s value even when the underlying price is unchanged. Read the model conventions before adding the effects.
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Intermediate
Implied volatility skew and the term structure
Implied volatility is backed out of option prices. Its pattern across strikes and expirations helps explain relative pricing, but does not reveal the future.
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Intermediate
Earnings events and the implied expected move
An earnings announcement can move both the share price and option volatility. Evaluate the required move and the premium at risk before choosing a contract.
Read articleDirectional Trading
Compare outright options, debit spreads and credit spreads using complete payoffs.
Intermediate
Long calls and long puts for directional trades
Buying a call or put gives a defined option premium at risk, but selecting the right direction is only one part of a successful trade.
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Intermediate
Bull call and bear put debit spreads
A debit vertical pairs a purchased option with a sold option of the same type and expiration. It reduces premium outlay in exchange for a capped...
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Intermediate
Bull put and bear call credit spreads
A credit vertical receives premium while accepting a bounded option payoff loss if the underlying moves through the protective strike.
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Intermediate
Choosing strikes and expirations for a trading thesis
Strike selection is a tradeoff among exposure, cost, time and the move required. Start with the research thesis rather than the smallest premium.
Read articleVolatility and Range Strategies
Study straddles, calendars, butterflies and iron condors across price and time.
Intermediate
Long straddles and strangles around uncertain moves
A long straddle or strangle buys exposure to a large move in either direction. The move must still overcome the combined premium and trading costs.
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Intermediate
Calendar spreads and changing volatility across time
A calendar spread trades differences between expirations. Its value at the first expiry depends on what remains in the later option.
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Intermediate
Butterfly spreads and the cost of a narrow target
A long butterfly concentrates its largest expiration payoff near a central strike. A low entry cost comes with a narrow target and several execution costs.
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Intermediate
Iron condors and iron butterflies with defined wings
Iron condors and iron butterflies combine put and call spreads. Protective wings bound the combined expiration payoff but do not remove management risk.
Read articleIncome with Shares and Cash
Evaluate covered calls, cash secured puts and income cycles through total returns.
Intermediate
Covered calls on shares you already own
A covered call exchanges some future upside for a premium today. It remains a stock position with substantial downside exposure.
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Intermediate
Cash secured puts and the obligation to buy shares
A cash secured put reserves money for a possible stock purchase. The premium lowers the economic entry cost but does not prevent buying after a severe...
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Intermediate
The wheel strategy measured by total return
The wheel links cash secured puts with covered calls after assignment. Evaluate the entire sequence, including the value of shares still held.
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Intermediate
Covered strangles and concentrated income risk
A covered strangle combines a covered call with a cash secured put. It can increase exposure precisely when the stock is falling.
Read articleProtecting Long Term Investments
Use puts, collars and selected overlays while preserving a clear investment objective.
Advanced
Protective puts for a long term stock position
A protective put sets a contractual exit floor for matched shares during the option’s life. The protection has a price and an end date.
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Advanced
Collars that exchange some upside for protection
A collar funds some put protection by selling a call against owned shares. It creates both a floor and a ceiling for the covered period.
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Advanced
Put spread hedges and the protection that runs out
A put spread hedge reduces premium by limiting the put payoff. Below the lower strike, the stock holding can resume losing value without additional option protection.
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Advanced
LEAPS calls as an alternative to owning shares
LEAPS are long dated options, not permanent shares. They can create directional exposure with less initial cash while introducing expiration and premium risk.
Read articleAdvanced Option Structures
Examine ratios, diagonals, synthetic exposure and financing structures.
Advanced
Diagonal spreads and the poor man’s covered call
A diagonal call spread uses different strikes and expirations. Replacing shares with a long dated call creates risks that a covered call label can obscure.
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Advanced
Ratio spreads backspreads and unequal contract counts
Unequal contract counts can create exposures that a familiar spread name hides. Count the contracts and inspect every price region before trading a ratio structure.
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Advanced
Synthetic stock and the limits of put call parity
A call and put can reproduce a stock like terminal payoff. Similar payoff shapes do not make their cash flows, rights and funding requirements identical.
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Advanced
Box spreads as financing rather than free money
A box spread packages a fixed terminal difference using four options. Its practical purpose is financing, with execution, collateral and settlement constraints.
Read articleExecution and Contract Lifecycle
Plan orders, assignment, settlement and expiration before opening a position.
Advanced
Placing option orders and measuring execution costs
A strategy becomes a real position through fills, not midpoint marks. Build an order that controls price and preserves the intended relationship between its legs.
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Advanced
Exercise assignment and the dividend calendar
Exercise and assignment change the form of a position. Plan for shares, cash and dividends before an option becomes an unexpected stock trade.
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Advanced
Expiration pin risk and zero day options
The last hours of an option can transform a small premium into large exposure. Treat expiration as an operational event as well as a pricing deadline.
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Advanced
Settlement adjusted contracts and corporate actions
Corporate actions can change what an option delivers. Rebuild the contract worksheet whenever a split, merger or special distribution affects the underlying.
Read articleRisk and Decision Making
Size trades, stress a portfolio and separate probability estimates from evidence.
Advanced
Sizing option positions from a loss budget
Start with the amount a position could lose, then decide its size. Premium received and broker buying power are different from a personal loss budget.
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Advanced
Stress testing Greeks and portfolio concentration
A portfolio of different strategy names can share the same hidden exposure. Reprice the positions together under adverse changes in price, volatility and time.
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Advanced
Probability of profit expectancy and tail losses
A high win rate does not establish a profitable strategy. Combine the size of wins, losses and costs, then examine outcomes beyond the average.
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Advanced
A trading journal that separates process from luck
A journal makes the reasoning behind an option trade reviewable. Keep the initial plan separate from later explanations invented after the result.
Read articleTesting and Trade Management
Test realistic strategies, evaluate adjustments and complete a documented trading case.
Advanced
Backtesting option strategies without hindsight
Historical option tests require more than stock price charts. Reconstruct the contracts, quotes and decisions available at each point in time.
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Advanced
Rolling an option position without hiding losses
Rolling closes one exposure and opens another. Evaluate both transactions instead of treating extra time or a new credit as the disappearance of a loss.
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Advanced
Exit rules adjustments and a strategy comparison
Plan exits before a position becomes emotionally difficult to manage. Compare closing, reducing and adjusting using the exposure that will remain.
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Advanced
Building a complete options trading case
Turn the guide into a complete research worksheet. A finished case connects a thesis with contract terms, costs, scenario payoffs and an exit procedure.
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