Options Trading, Part I

Recently, a reader asked a question about how to trade options. I thought about this question, and I realized I needed to explain a lot of background before we can get into the nitty gritty.

First, I do assume you understand what a stock is and the various drivers of stock price.

Second, I assume you have the understanding that investing is inherent risky and options even more so.

Third, I assume you have some fundamental math skills and can use Excel.

Now, rather than explaining what a basic option is, I will link to the Wikipedia article that already explains it pretty well. You only need to read the intro, section 1 and section 6 of the article. The rest is either useless or will be explained by me.