Options Trading for Beginners: Calls, Puts and Risk

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

1. Calls and puts

   Rights, obligations, strike and expiry, and the payoff diagram for each.

2. What sets the premium

   Intrinsic value, time value, time decay and implied volatility, without the formulas.

3. Income strategies

   Covered calls and cash-secured puts: what you give up for the premium.

4. Defined-risk spreads

   Vertical spreads, and how to know your maximum loss before you enter.

What every course contains

Every paid course comes with the first seven and the certificate, whichever level it sits at. The proctored exam and the credential come when the course is taken as part of a Certificate, Diploma or Fellowship. Everything is self-paced: the material is yours to study in any order, at any hour, for the whole of the license.

1. Workbooks. Written to train the thinking patterns and the important concepts of the course, with worked problems and the reasoning behind each answer, so that you learn to think the way the subject is thought.
2. Audio edition. Focused, well-presented recordings with explainers and examples of the material, made to be interesting, relevant and entertaining, so that the general subject can be learned away from the desk.
3. Notes. Pre-produced notes with every fact the course relies on, written out in full, so that nothing has to be transcribed from the films or the audio.
4. Cheat sheet. One sheet with every important learning concept of the course on it, to keep beside you during the work and to revise from before the exam.
5. Named sources. Every fact in the notes names its source, the paper, the book or the dataset, for anyone who wants to dig in further.
6. Explainer films. Focused films, in the style of the sample films on the catalog page, that walk through the most difficult concepts of the course with visual explanations of a high standard.
7. Transcript. A full transcript of every film and every audio recording, searchable and quotable.
8. Proctored exam. Taken as part of a Certificate, Diploma or Fellowship, the course ends in a proctored multiple-choice questionnaire, with a pass mark of 60% and three retakes included. A course taken on its own is assessed by its coursework and has no exam.
9. Verifiable certificate. A certificate of completion that a third party can verify: an employer sends the code on it to the credentials office and receives written confirmation of the course, the date and the result.
10. Credential of the program. The Certificate, Diploma or Fellowship of the program, track or path the course belongs to, awarded when every course in it is passed. Which one depends on the program you choose.

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 for Beginners, issued by the Institute with a verification code. A course taken as part of a Certificate, Diploma or Fellowship ends in a proctored online exam with a pass mark of 60%. The fee includes three retakes; each attempt after that carries a reduced proctored exam fee. A course taken on its own is assessed by its coursework and has no exam. Read how certification works.

Before you start

How to Trade Stocks: Orders, Costs and the Spread, and Stop Losses, Position Sizing and Your Trading Edge.

• How to Trade Stocks: Orders, Costs and the Spread
• Stop Losses, Position Sizing and Your Trading Edge