Practitioner course in discretionary trading
Options Trading for Beginners: Calls, Puts and Risk
Options trading for beginners, taught with payoff diagrams and a spreadsheet instead of formulas: what calls and puts are, how premium, time decay and implied volatility set the price, the common strategies such as covered calls and spreads, and the ways options lose money for the people who buy them.
Options trading for beginners usually starts with the wrong lesson: that options are a cheap way to make a big bet. They are a way to buy or sell a defined piece of risk, and the price of that risk is set carefully by the market. This course teaches what you are buying and selling, and how to keep the loss known before the trade is placed.
How do options work?
A call option gives the right to buy at a set price before a set date; a put gives the right to sell. The buyer pays a premium for that right, and the seller keeps it in exchange for taking the risk. The course draws the payoff of every position before discussing it, so you always know what happens at each price.
Why do most bought options expire worthless?
Because an option’s time value shrinks every day, and the market often prices in more movement than actually happens. A buyer needs the move, and needs it soon enough. The course shows you how to read this from the option chain and why many traders prefer defined-risk spreads.
Who is this course for?
Stock traders who want to use options for income, protection or defined-risk trades. No programming is needed.
What you will be able to do
- Draw the payoff at expiry of calls, puts and simple combinations, and explain each in plain words.
- Explain how time to expiry and implied volatility change an option's premium.
- Plan a covered call, a protective put and a vertical spread with a defined maximum loss.
- Size options positions within a stated account risk, and explain why bought options usually expire worthless.
Syllabus, module by module
Calls and puts
Rights, obligations, strike and expiry, and the payoff diagram for each.
What sets the premium
Intrinsic value, time value, time decay and implied volatility, without the formulas.
Income strategies
Covered calls and cash-secured puts: what you give up for the premium.
Defined-risk spreads
Vertical spreads, and how to know your maximum loss before you enter.
Hedging
Protective puts and collars on a stock you own, and what the protection costs.
How options lose money
Time decay, volatility crush after earnings, wide spreads and leverage.
How the certificate is earned
Weekly payoff exercises and two graded problem sets: an options workbook built in a spreadsheet, and a twelve-week simulated record of defined-risk options trades with a review. On a pass you receive the Course certificate in Options Trading, issued by the Institute with a verification code. Read how certification works.
Before you start
How to Trade Stocks: Markets, Brokers and Orders and Stop Losses and Position Sizing for Traders.
This course counts toward
- Intermediate Certificate in TradingThe second semester of the trader path: a day trading course and swing trading course in one, covering technical analysis, price action, intraday execution, news, options, evidence-based testing and the written trading plan, with a tested-plan capstone. No programming.
- Diploma in Professional TradingThe top credential on the trader path and the Institute's trading certification for people who do not write code. Three semesters, 24 courses and a 160-hour capstone, from a first lesson on how markets work to a six-month simulated trading business reviewed like a desk.
Questions applicants ask
Are options riskier than stocks?
It depends on how they are used. A bought option can lose all its premium, and a sold option without cover can lose far more than the premium received. Defined-risk strategies cap the loss in advance. The course keeps every graded trade defined-risk.
Do I need to learn the Black-Scholes formula?
No. The course explains what the formula captures in plain words and uses a spreadsheet and your broker’s option chain for the numbers. The Institute’s quantitative courses cover the mathematics for those who want it.