Derivatives Beginner to advanced
Options and Derivatives: Calls, Puts, Greeks and Spreads
An option is a contract whose value depends on something else. That one idea produces the Greeks, implied volatility and every strategy from a covered call to an iron condor. These guides build it up in order, with the arithmetic shown.
An option is a contract whose value depends on something else, and that one idea generates everything in this section. The guides start with what a call and a put actually promise, then move to how the premium is priced, what the Greeks measure, and why implied volatility collapses after an event. The second half covers the strategies built on top: covered calls, cash-secured puts, vertical spreads, iron condors and futures.
It is written for everyone, though it asks for more arithmetic than any other section. You should be comfortable with shares, limit orders and position sizing before you start. Every example shows its numbers, because an options position that looks like a small bet can carry stock-sized exposure, and the only way to see that in advance is to work it out before you place the trade.
The build is strictly sequential. The pillar covers contract terms, moneyness and intrinsic versus extrinsic value. The Greeks guide turns those into rates of change: delta for direction, theta for time, vega for volatility. Implied volatility explains where premium comes from and why it falls apart after earnings. Only then do the strategy guides make sense, from covered calls and cash-secured puts as single-leg income trades, through verticals as defined risk, to condors as a range bet and futures as the leveraged cousin.
Options touch the rest of the site at several points. Premium is priced off the same interest rates the bond section covers. The earnings crush connects to the earnings report guide in stocks and to earnings season trading. Technical levels often decide strike selection, and the screener helps find the underlyings worth writing against. The Pro Desk carries the subject further into the VIX, options flow and dealer gamma.
Options Trading for Beginners: Calls, Puts and Premium Explained
Calls, puts, strikes, premium and expiry, with the arithmetic for a single contract shown at every step so you can check the numbers yourself.
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- intermediate
Option Greeks Explained: Delta, Gamma, Theta, Vega and Rho
Delta, gamma, theta, vega and rho are sensitivities, and each one turns into dollars when you multiply by 100. One contract, five numbers, all of them worked.
- intermediate
Implied Volatility Explained: IV, IV Rank and the Earnings Crush
IV is solved backwards out of the option price rather than measured from history. Here is the arithmetic that turns a percentage into an expected dollar move.
- intermediate
Covered Calls: How to Earn Income on Stocks You Already Own
A covered call converts unknown upside into a known premium. Here is the static return, the if called return, and the payoff at every expiry price.
- intermediate
Cash-Secured Puts: Getting Paid to Wait for Your Price
Selling a put collects premium for agreeing to buy 100 shares at your strike. Here is the return on the cash you tie up, and the loss the arithmetic allows.
- intermediate
Vertical Spreads Explained: Bull Call, Bear Put, Credit and Debit
A vertical spread caps both ends of the payoff for a known cost. Here are all four, with the arithmetic that fixes the maximum profit and loss before you trade.
- intermediate
Futures Trading Basics: Contracts, Margin, Contango and the E-mini
Futures are sized by a multiplier rather than by share count. Here is the tick arithmetic, the leverage it creates, and where contango takes money from holders.
- intermediate
Options Expiration and Assignment: What Actually Happens
Expiration runs on published rules that nobody reads until a share position appears on Saturday. Here is the sequence, with the arithmetic that decides each step.
- intermediate
Protective Puts and Collars: Paying to Cap Your Downside
A put turns an open ended loss into a known one for cash paid up front. Here is the annualised price of that floor, and what selling a call to fund it really costs.
Advanced
Options & Derivatives: common questions
How do options work for beginners?
A call gives you the right to buy 100 shares at a set strike price before expiry. A put gives you the right to sell. You pay a premium for that right, and as a buyer the premium is the most you can lose.
What are the option Greeks?
Numbers describing how an option's price reacts to change. Delta tracks the stock move, gamma tracks how delta shifts, theta measures daily time decay, vega measures sensitivity to implied volatility, and rho covers interest rates.
What is implied volatility?
The volatility figure that makes a pricing model match the option's market price. It reflects how much movement traders expect before expiry, which is why it climbs into earnings and falls sharply once the result is public.
Are covered calls safe?
They lower risk slightly by collecting premium and they cap your upside at the strike. The downside is the same as owning the stock, less the premium received, so a large decline still costs you real money.
How much money do I need to trade options?
Buying single contracts can cost a few hundred dollars. Selling cash-secured puts or covered calls needs enough cash or 100 shares per contract, which on a $50 stock means $5,000 tied up.