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Call options are one of the two primary option types, with put options being the other.
In this video, I explain the basics of call options in great detail, covering:
0:00 – Introduction
0:47 – What is a Call Option?
2:10 – The Option Contract Multiplier
3:35 – How a Call Option’s Value is Determined
5:20 – A Call Option’s “Intrinsic Value”
6:25 – How Call Buyers Make Money
10:03 – How Call Buyers Lose Money
15:00 – What is Extrinsic Value?
16:35 – Call Option Trade Examples Visualized
24:00 – Buying a Call on tastyworks (Trade Demonstration)
33:35 – What is Shorting a Call Option?
34:22 – Short Call Trade Examples Visualized
39:40 – Shorting a Call on tastyworks (Trade Demonstration)
I realize I did not talk about exercising call options in this video, and that’s because options are rarely exercised due to the loss of extrinsic value when exercising an option.
Instead, options traders buy/sell options with the intent of profiting from the price changes of the option contracts, and have no intention of ever exercising the options to convert them into shares.
Be sure to leave a comment down below with any questions you may have!
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