To build a foundation for further developing the users ability to understand option terminology and communicate about options effectively and to begin understanding how investors may use options in different circumstances.
Beginner Students
Options Basics will introduce the user to the terminology, basic components, and mechanics of options. This class is designed for those who have little or no understanding of options and is designed to arm the learner with a basic entry-level foundation for further understanding options.
Introduces what an option is, a brief history of options, what rights an option’s contract conveys, and the mechanics of the physical delivery of options.
The terminology chapter defines the two types of options, the difference between buying and selling options, and the exercise / assignment process.
This chapter further defines the components of an option, and then discusses the history of options, the participants in the market, and the domestic exchanges that list equity and index options.
In this chapter the differences between buying and selling calls and puts are displayed with an interactive graph. This chapter also gives instructive "what-if" scenarios for both long and short option positions.
For this chapter, option premium is defined and explained. The calculation of profit and loss is discussed, along with how an option is defined in relation to the underlying. This chapter also explains how to calculate the components of an option's value, and how the passage of time affects option premium.
This chapter discusses the mechanics of exercising long options, the affect of assignment on a short option position, and how and when options cease trading due to monthly expiration.
In this chapter the student is given interactive charts that display profit and loss for the varying option positions.
Review of what you have learned and final quizzes.
OIC130P: A Review of Options Basics
OIC140P: Options Basics and Terminology
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This web site discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this web site is to be construed as a recommendation to purchase or sell a security, or to provide investment advice. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr., Suite 500 Chicago, IL 60606 (1- 800-678-4667).
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