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Learn the absolute essentials of call options in this “zero to hero” crash course!
In this video, you will learn the basics of call options, how traders make money buying and selling them, why causes call option prices to change and see a real AMZN call option trade entry and exit demonstration using real brokerage software.
0:00 Intro
0:11 What is a Call Option?
1:16 How Do Call Buyers Make Money?
3:19 Why Do Call Option Prices Move with the Stock Price?
4:50 Intrinsic Value Explained
5:59 Expiration Breakeven Price Explained
6:51 Extrinsic Value Explained
9:57 New Options Strategy Course/Data Collection
10:18 Call Prices vs. Volatility Expectations
13:22 Call Prices vs. Time to Expiration
16:58 REAL Call Option Entry Demonstration (AMZN)
24:15 REAL Call Option Exit Demonstration (AMZN)
30:51 What Happens at Expiration?
What is a call option?
A call option is a financial contract that grants the buyer/owner the right, but not the obligation, to buy an asset at a fixed price between now and the option’s expiration date.
How do call option buyers make money?
Call option buyers make money by purchasing call options and selling them at higher prices, which stems from an increase in the stock price and/or an increase in the expected volatility of the stock.
Why do call prices move with the stock price?
Since the call buyer can purchase shares of stock at a fixed price (the strike price), the value of that ability will grow as the stock price increases and fall as the stock price declines.
How do call prices change vs. volatility expectations?
If the market expects more volatility from a stock going forward, the market bids up the option prices since larger stock price movements can lead to higher option valuations than smaller stock price movements.
How do call prices change vs. time to expiration?
As time passes, a call’s extrinsic value will decay toward zero as the option’s expiration value becomes more certain. With lots of time to expiration, options will be expensive since there’s lots of time for the stock price to make a big move and cause options to become more valuable. With less time to expiration, options will be cheaper since there’s not much time left for the stock price to move and cause options to become more valuable.
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I hope this video helped! Please leave me video feedback and questions down below! 😀
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