OPTIONS TRADING FOR BEGINNERS 📈 How To Trade Stock Options #Best Education Page #Online Earning

- How's it goin' today, guys?

So I have a brand new thing to bring to you,

and this is going to be a guest video on this channel.

So I've had a lot of people ask me about

doing a video on options trading, and personally,

I have no experience in options trading,

so I'm bringing in my friend Justin

from the Road to the 2 Commas Club.

He's basically documenting his progress

as far as trading with his end result of having

two commas in his trading account,

so if you guys like this video,

make sure you jump over to his channel

and subscribe and give him some support

on his videos, and I will link up to them

in the description, but these are the,

basically, his YouTube channel is YouTube.com

/2CommaClub, and then his Instagram account

is Jrskatr, so make sure you guys

show him some love and jump over to his

YouTube channel if you enjoy this video,

and if this is something you wanna see more of,

let me know, and I may have other guests

on the channel, so let me know what you guys think,

and I'm excited to bring this video to you.

- Hey guys, how's it goin', my name is Justin Rodriguez,

and I'm here to talk to you guys today about

call options and put options,

just the very basic fundamentals.

Before I start, I wanna give a special thank you

to Ryan for letting me come on his channel

and share this information with you,

I'm really thankful for that, so thanks, Ryan.

Hopefully you guys will learn a lot today,

and if you do wanna see more, he's gonna

be putting a link to my YouTube channel in the description,

which is a vlog of me trading on a day-to-day basis,

I'm trying to hit a goal of 1,000,000 dollars

in my account, and I started five years ago

with 16,000 dollars, and I've been

able to build it up in the last five years

to a little under 60 grand right now

is where I'm at, so I'm kinda documenting

my journey in a vlog format,

so you'll kinda see me doing day-to-day stuff,

but talking about the trades I'm doing,

what stocks I'm looking at, what options

I'm looking at, and as I do that,

I try to teach you guys as much as I've learned

over the years to kinda speed up your learning curve

if you do wanna get into investing like I did.

Because when I started, I knew absolutely nothing,

and I literally had to learn how to buy a stock

when I started, and all I did for the first

four years was just buy stocks and hold onto 'em,

so I really didn't know much of anything,

but that's kinda how I learn, I just kinda

learn by doing, and so I bought stocks,

I sold stocks, I learned how to do that,

and then, finally, last year, I decided

I need to learn more strategies to maximize

my profits, and so I've been learning more and more,

and I learned how to do limit orders,

for example, I learned how to do stop on quote orders,

dividend reinvestment, and I saw the highest

returns I've ever seen last year once I started

getting more serious about it,

and this year, I started learning how to trade options,

and I'm already seeing the most profits I've seen ever.

So, I really wanna share this information with you guys,

so that if you're in the market and you wanna

look into trading options, you can consider this,

and hopefully get a lot of profits for yourself,

so thanks again, Ryan, for letting me come on your channel,

and let's just get into it.

So, when you buy an option, you're buying a contract.

So, let's just pretend this piece of paper

is the contract right here, and this is a actual,

this is one of the options that I currently own.

I own a call option on AAPL with a strike

price of 150 dollars, expiration date

of October 20th, 2017, and it cost me

$2.65 per share to buy this contract,

so let's talk about what a call option is,

and then we'll go into what a put option is.

So a call option is a contract that gives you the option

to buy a stock at a specified price,

and all contracts have an expiration date,

and all contracts are good for 100 shares,

so this call, I'll put it up here,

this contract that I bought was for 100 shares

of AAPL, and since it was $2.65 a share,

it actually cost me 265 dollars for the contract,

so you have to multiply that price per share

by 100 to calculate how much you're gonna

have to actually spend on that contract.

Okay, so once you find the stock that you

wanna buy, so I picked AAPL, and you

decide whether you're gonna do a call or a put,

I did a call option, because I want the option

to buy the shares, whereas a put option

gives you the option to sell share,

but we'll talk about that in a little bit.

So once you do that, you wanna pick a strike price,

now, the higher the strike price is away from

the actual current price, the cheaper it'll be

for you to buy, because there's more risk on your end

that you're taking on, because the higher

the spread is, the less likely that stock price

will get to that strike price that you set,

so the higher you go, the cheaper it'll be,

the closer you get, the more expensive it'll be,

because it's more likely for that stock price

to hit your strike price, and once it goes

above what the call option, it's called

being in the money, meaning your contract

now has value, even if it expires,

it's still worth something, because you can still,

let's say AAPL goes up to 175 dollars a share,

you still have this contract that says

I can buy these shares at 150, so that makes

your contract more valuable.

Okay, and so, the other piece of information

you wanna look at is the expiration date.

So, again, it's really all about

the probability and the risk that you take on,

so if you pick an expiration date one month

in advance, that's pretty risky, because the likelihood

of that price hitting your strike price,

depending on where you set it,

if you only give yourself a month of time,

it's less likely to happen, which means

you're taking on more risk, which means

the contract will be cheaper.

If you set an expiration date of five, six months,

or a year, or two years, the further out

you set the expiration date, the more

expensive it'll be because you're taking

on less risk because you're giving yourself

a lot more time for that stock price to hit

the strike price, which is more likely

to happen if you give yourself more time,

so the more time you give, the more you'll pay,

but the safer it'll be, and so when I bought

this contract, it was February 10th of this year,

and AAPL was currently trading, was trading

at that time at $132.12 a share, and since

the contract was $2.56 a share, I actually

purchased five contracts, so it was 265 times 5,

with a fee of $10.50, so I spent

$1,335.50 on this contract.

Now, today, I'm filming this on April 2nd,

this is a Sunday today, but we're lookin'

at last Friday's price, AAPL is currently

right now trading at $143.66 a share,

so since the AAPL price went up 11 dollars,

the call option became more valuable,

because the call option is getting,

it's more quickly approaching the strike price,

and so, that's making my contract more valuable,

even though I didn't hit the strike price yet,

I still have until October 20th, so my contract

is becoming more valuable, so right now,

my contract is worth $6.20 a share,

and if I were to sell all five contracts right now,

I would get about $3,100 for it,

which is a profit of $1,764.50,

which is 132.12% return,

so that is a very high return,

as most of you guys probably know.

If I were to actually get that return from

actual AAPL stock, AAPL would need to be trading

at $306.52 a share for me to get

that same return if I just owned the stock.

Now, you can probably just figure that out,

that is very, very unlikely to happen

between February 10th and now, it is almost

impossible for that to happen,

so, one of the advantages of buying options

is you have the room to make a lot more profit,

but with that room for more profit comes more risk.

If this, if AAPL's stock price had gone down,

my contract would've gone down a lot more in value,

and it would've been worth way less,

and I would've lost a lot more money owning this option,

so you really wanna be careful and you really

wanna be sure that the stock you're gonna

buy an option for is going to go up because

you don't want to lose a lot of money.

Some of the things you could do to minimize

your risk is picking an expiration date further

down the line, gives you more time,

and also picking a strike price that's closer

to the current price, that'll also lower your risk.

So you can kind of adjust, however much risk

you wanna take on, you can adjust what strike

price you want, and what expiration you want.

I personally like to go pretty close to the money,

and then I give myself a lot of time.

I do understand that I have to pay more for that,

but it's worth it for me to take on the less risk.

Okay, so let's go on, so again, so we talked about

the advantages, you can make more profit,

another advantage, though, of getting a option

versus buying the stock is it's cheaper.

So, with AAPL trading at $132 a share when I bought it,

the option, it only cost $2.65 a share to get the contract,

so for one contract, it was 265 dollars.

I wouldn't even have been able to get two shares

of actual AAPL stock for that much,

and so it's a lot cheaper, and it allows you

to get into that security, that company,

investing in that company with a lot less money,

and so that's one of the reasons I like options,

is because it just makes it more affordable,

and if you're willing to take on that risk,

then it's a good option for you to do.

So again, the disadvantages are, you can lose more money,

and it's a lot more volatile, so if AAPL's stock

goes down, you're gonna lose a lot more money

owning options than you would if you owned the stock,

so that's one of the disadvantages of owning call options.

Now, some of you might be thinking, okay, you have

an expiration date of October 20th, does that

mean you have to hold onto that contract,

and then you have to buy the shares when it expires?

The answer to that is no, you can actually

trade your contract just like you would trade

a share of stock, and you can sell it literally

any point in time after you buy it, between the

moment you buy it until the moment the contract

expires, you can sell that contract and get

out of that position, so you can just trade

it just like you would a stock,

and that's usually what I do, I don't ever hold

my contracts to expiration, I just sell them

and take the profit and then I just buy

some more options with that.

Okay, so that pretty much sums up call options,

so to kinda resummarize, you have, a call option

is an option to buy a stock at a specified price,

and then you want the stock to go up in value,

'cause that'll make your contract worth more,

and you can trade it just like you would trade

a stock, you don't need to keep it 'til expiration,

you can just trade it like a stock, and you will,

you can see a lot more returns from options.

But with that, you take on more risk.

Okay, so let's switch over to put options to kind of

talk about the difference.

Now, with a put option, you're buying a contract

to sell a stock at a specified price,

so if you wanna buy a contract that gives you

the option to sell a stock at a certain price,

you want that stock price to go below that strike price,

because if it does go below it, your contract

is more valuable, and then you can sell your

put option for a profit, okay, so what you don't

want to happen is you don't want the stock

price to keep climbing because then your contract

is worth less and less, and if it expires

and the stock price is above your strike

price with a put option, your put option is worthless,

and you lose all that money when the contract expires.

So, it's literally the exact opposite of a call option.

And I don't know if I mentioned this earlier,

'cause it's been a while, I've talked a lot already,

but the way I remember call is C and B

are right next to each other in the alphabet,

so call is a option to buy, helps you remember it,

and then put, P and S are close to each other

on the alphabet, so that can help you

remember that as well.

All right, so that kinda wraps up the overview

of calls versus put options, there is a lot more

detail I can go into this, but it would take

a lot more time, and there's so many different

types of options you could do, there's so many

more terminology and lingo to learn, it could

be overwhelming, so what I did is I just learned

the very basic, okay, how do I buy a call option,

and then how do I sell it?

And so, that's literally all I learned,

and that's what I'm doing, but what we're

thinkin' about doing, Ryan and I, we talked about this,

is doing maybe a series of videos with options,

just so I can go into more detail without makin'

this a 50 minute video, because there's things

called covered calls that we could talk about,

there's extrinsic versus intrinsic value,

it's just kind of more terminology that you

could learn about options, and then the Greeks

that people call it, the "Greeks,"

there is different variables that represent

different characteristics of options such

as the volatility, and it's just more information,

but for a brief overview video, I didn't want

to go into that much detail, I just wanted to explain

to you real basic, what is a call option,

what is a put option, what do you want to happen

when you own a call versus a put,

and so I'm just gonna kinda leave it at that.

The last thing I will mention is how to actually

buy a call option, because some of you have

never probably done it before, and I had to figure

this out myself, 'cause I couldn't find a video

on how to do it when I was looking, but if you

are buying a call option, like on ScottTrade,

for example, I don't know what it is on other platforms,

but I trade with Scott Trade, so the way you

do it is, when you go to buy an option,

you buy it just like you would a stock,

but instead of a stock where you just click buy,

and then you type in the symbol, if you're gonna

buy an option to own, you're gonna click

buy to open, so you're buying to open your

position in that security, so that's why

they call it buy to open, and then, when you sell

that security, you're selling to close your position,

and so, when you wanna sell your option to get rid of it,

you would click sell to close, and then put in all

the other information.

All right, so I'm gonna go ahead and type in,

so I switched from stocks to ETS, I switched over

to options, so you see a few more things come up here,

and we'll talk about that, but so I wanna type in AAPL,

A-A-P-L, and that'll bring,

and then I'm gonna select buy to open,

'cause I wanna buy some more options to open my position.

So I went buy to open, and then, here's what I choose next,

expiration date, I'm gonna stick with the October 20th

expiration, because I'm gonna look to sell my stuff

right after the iPhone's released, pretty much,

anyways, so there's no point in me holding onto it

after that, so I'm sticking with the October 20th,

and once I select the call and put,

it'll populate the current prices, so let's just

go ahead and go to, for example,

let's do what my, one of my calls

is at right now, $150, when I select call...

There you go, you'll see the popup,

it actually has gone up in value since

earlier in this little video, so it's actually

up now, but watch what happens when I choose

a higher strike price, so let's say I go to one,

let's say I go to 160, and then I select call.

You can see the price went down, and that's

because, again, there's less of a chance of AAPL

hitting 160 than it has from hitting 150,

so because you're taking on more risk because

there's less probability of that happening,

it is cheaper to buy the option, so instead of over

$600 per option, this is $335 per option.

And I think the one I have right now,

the other one I have right now is 165,

and so we'll see what that price is.

See, it's a little bit lower, so $230 per option.

And so let's see how much I can afford,

I'm just gonna go to calculator here.

So I'm gonna type in 2286 divided by,

the price was $2.30, so $230 per contract,

so that means I could buy nine more contracts,

I can afford nine more contracts, so, actually,

nine is one of my favorite numbers,

so let's just do it, so let's just go ahead and do it,

so I'm gonna hit nine for number of contracts.

October 20th, the 165 strike price,

call market, which means I wanna buy it right now.

There's other options you could do, like limit and,

but we don't need to get into that right now,

it's a little bit more advanced, so I'm just

gonna do market, review order,

and so it'll cost me $2,000 with my commission,

so you can see how the commission is a lot more

than seven dollars for options, and I'm not sure

why they do that, but it probably has to do with

the fact that it's more risky, so they just,

or maybe it was because I bought nine contracts

instead of one, I'm not 100% sure, but that's

really not too important, 'cause I'm just showin' you

how to actually buy an option, so I'm gonna click

place order here, and then market order placed,

and then it says thank you, you ordered nine contracts,

and then I can just go ahead and minimize this,

and then right here, when I hit refresh,

it'll show that I sold my AMD shares,

and then, for some reason, it split this up,

I guess, apparently, when I did the order,

I don't know, by the time it executed,

the price changed by a penny, apparently,

so it split it up into two separate orders,

but the commission is still totaled the same,

it's still gonna total the same amount.

It doesn't charge you double commission.

So I'll hit refresh here, and you'll see my balance

will drop down, and then if you

go here and hit refresh, we can see

that I now own 39 call options for AAPL

instead of 30, 'cause I actually owned

30 before that, so I own quite a bit,

I have quite a bit of money invested in Apple right now,

I got about nine grand in this option, and I have

3200 in this option, but AAPL's

doing well today, so we're doin' pretty well

today so far, this is not the exact number,

because it just added this into it,

so it's not completely accurate, but we're still

doin' pretty good today, so yeah, so this is the kind

of stuff I show on my vlog, whenever I do a trade,

I usually will film it and talk about it,

so if you guys wanna learn more, you definitely can.

All right, sorry, that actually went kinda long,

so I'll try to cut it down in editing so I can

send it over to Ryan, and he can throw it in the video

before he uploads it, and then yeah,

all right guys, take care.

All right, so that about wraps up my part of the video.

Hope you guys learned a lot, I'm gonna pass it back

to Ryan, and if you are interested in checkin'

out my channel, Ryan's gonna leave a link down

below in the description, would really appreciate

it if you checked it out, very thankful for Ryan

for helpin' me out with that, and thank you guys

for watching, and I hope you guys learned a lot,

and we will see you around.

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