Options and Option Pricing Basics

In this section

• What an Option Contract Is
  Understand options as contracts that give buyers rights and create obligations for sellers around an underlying asset.
• Core Terms in an Option Contract
  Learn the essential option terms, including strike price, expiration date, and premium, and why they matter.
• How Options Work in Practice
  Follow basic call and put examples to see how options are bought, sold, exercised, or allowed to expire.
• Intrinsic Value and Time Value in Options
  Understand the two main components of an option’s premium and how they change as market conditions evolve.
• Risks and Rewards of Options Trading
  Learn the potential benefits of options leverage and the substantial risks that come with option positions.