Options Trading

A call gives its buyer the right to buy the underlying at the strike and gives its seller the obligation to sell if assigned.

A put gives its buyer the right to sell the underlying at the strike and gives its seller the obligation to buy if assigned.

Strike selection controls moneyness, premium, delta, leverage, probability, and the amount of extrinsic value purchased.

Expiration selection determines how much time the thesis has to work and how much time value the buyer pays.

Option profit and loss depends on premium change before expiration and final intrinsic value at expiration.

Option premium reflects intrinsic value plus extrinsic value shaped by time, volatility, rates, dividends, and market supply-demand.

Delta estimates how much an option’s price may change for a $1 move in the underlying, holding other factors approximately constant.

Gamma estimates how much delta changes for a $1 move in the underlying.

Theta estimates option value lost from one day of time passing, holding other inputs approximately constant.

Vega estimates how much option premium changes for a one-percentage-point change in implied volatility.

Implied volatility is the volatility input that reconciles an option pricing model with the market premium.

Greeks describe different dimensions of option exposure and should be evaluated together at the position level.

Options risk must be quantified before entry using maximum loss, likely loss, assignment exposure, and adverse scenarios.

Options position sizing converts an account-level risk limit into a contract quantity.

Option liquidity affects entry cost, exit quality, position marks, and the ability to adjust risk.

Expiration concentrates time decay, gamma, exercise, assignment, and operational risk.

An options trade plan connects the underlying thesis with contract selection, risk, management, and exit rules.

Most options mistakes involve excessive leverage, poor contract selection, ignored volatility, weak liquidity, or unmanaged expiration.

Options scalping seeks small, short-duration moves in option premium, often within minutes.

Scalp contracts should offer sufficient delta, tight spreads, active trading, and predictable execution.

A scalp entry requires a precise underlying trigger, executable contract, and immediate invalidation.

Scalp risk management uses small predefined loss, limited attempts, and immediate response to invalidation.

Scalp exits prioritize execution and process because small gains can disappear quickly.

Scalp review separates setup quality, execution quality, and risk discipline.

Options swing trading holds contracts across multiple sessions to express a directional or volatility thesis.

A swing thesis states why the underlying should move, what confirms it, how long it may take, and what disproves it.

Swing expiration should provide enough time for the expected move and normal market noise without paying unnecessary time value.

Swing strike selection balances directional sensitivity, capital, break-even, liquidity, and probability.

Swing management responds to changing underlying structure, time, implied volatility, and upcoming events.

A swing review evaluates thesis, contract selection, management, execution, and risk-adjusted outcome.

LEAPS are long-dated listed options, generally with expirations more than one year away when listed.

LEAPS calls can provide leveraged upside exposure with less initial capital than shares, while shares provide indefinite ownership rights and no expiration.

LEAPS strike selection determines capital, delta, break-even, extrinsic value, and downside profile.

LEAPS expiration selection balances time for the thesis with premium, vega, liquidity, and the planned review horizon.

LEAPS risk management addresses total premium, changing delta, volatility, company fundamentals, liquidity, and the finite expiration date.