Lesson 1 – Equity Options as Contracts
Equity options, like some other financial instruments, are introduced and defined as contracts that trade on exchanges like stock. The similarities and differences between equity options and stock are discussed.
Lesson 2 – What Is an Equity Option?
Like contracts of any kind, the two types of options, calls and puts, are reintroduced as contracts but with standardized terms. Put the terms together and you'll see how specific equity options are identified and referred to.
Lesson 3 – Equity Calls and Puts
Moving forward on the topic of equity call and put contracts, you’ll find more detailed definitions of both along with specific examples. You'll learn that an option "holder" buys option contracts and obtains rights, and that an option “writer” sells contracts and assumes obligations, to purchase or sell shares of the underlying stock. The very commonly used terms "long" and "short" will be introduced.
Lesson 4 – Equity Option Premium
The cash you'll pay to buy an option contract in the marketplace, and/or the cash you’ll receive after selling one, is called the "premium." You'll learn how this cash amount is calculated, as well as the difference between a "debit" vs. a "credit" option transaction.
Lesson 5 – Exercise and Assignment
The option-specific terms "exercise" and "assignment" are defined, and the consequences of these processes are illustrated with specific examples. You'll learn the simple difference between American-style and European-style options. The crucial role The Options Clearing Corporation (OCC) plays in the options industry is also introduced.
Lesson 6 – Option Expiration
Like other forms of contracts, equity options expire. You'll learn the standardized method to determine an equity option’s actual expiration date as well as the last day the option may be bought or sold on an exchange. Equity LEAPS, a term for equity options with long-term expirations dates, are briefly introduced.
OIC102P: Introduction to Financial Markets and Option Basics
OIC103P: An Exploration of Basic Options Terminology
OIC101W: The Options Basics Webcast