Options Trading: THE COMPLETE CRASH COURSE 3 books in 1: How to trade options: A Beginners’s guide to investing and making profit with options trading + Day Trading Strategies + Swing Trading by Warren Ray Benjamin

Options Trading: THE COMPLETE CRASH COURSE 3 books in 1: How to trade options: A Beginners’s guide to investing and making profit with options trading + Day Trading Strategies + Swing Trading by Warren Ray Benjamin

Chapter 1: Options Contracts: The Basics
In this chapter, we will introduce the concept of options contracts and how
they are used in the stock market. In our introductory discussion, we will be
focusing on the most basic way to get involved in options, which involves
buying options contracts based on bets you make on whether future stock
prices will rise or fall. Later we will see that you can also write or sell
options contracts and that the contracts themselves are traded on the
markets.
What is an Options Contract?
An options contract sounds fancy but it’s a pretty simple concept.
It’s a contract. That means it’s a legal agreement between a buyer and
a seller.
It gives the purchaser of the contract the opportunity to purchase or
dispose of an asset with a fixed amount.
The purchase is optional – so the buyer of the contract does not have
to buy or sell the asset.
The contract has an expiration date, so the purchaser – if they choose
to exercise their right – must make the trade on or before the
expiration date.
The purchaser of the contract pays a non-refundable fee for the
contract.
While the focus of this book is on options contracts related to the stock
market, there are options contracts that take place in all aspects of daily life
including real estate and speculation. A simple example illustrates the
concept of an options contract.
Suppose you are itching to buy a BMW and you’ve decided the model you
want must be silver. You drop by a local dealer and it turns out they don’t
have a silver model in stock. The dealer claims he can get you one by the
end of the month. You say you’ll take the car if the dealer can get it by the
last day of the month and he’ll sell it to you for $67,500. He agrees and
requires you to put a $3,000 deposit on the car.
If the last day of the month arrives and the dealer hasn’t produced the car,
then you’re freed from the contract and get your money back. In the event
he does produce the car at any date before the end of the month, you have
the option to buy it or not. If you really wanted the car you can buy it, but
of course, you can’t be forced to buy the car, and maybe you’ve changed
your mind in the interim.
The right is there but not the obligation to purchase, in short, no pressure if
you decided not to push through with the purchase of the car. If you decide
to let the opportunity pass, however, since the dealer met his end of the
bargain and produced the car, you lose the $3,000 deposit.
In this case, the dealer, who plays the role of the writer of the contract, has
the obligation to follow through with the sale based upon the agreed upon
price.
Suppose that when the car arrives at the dealership, BMW announces it will
no longer make silver cars. As a result, prices of new silver BMWs that
were the last ones to roll off the assembly line, skyrocket. Other dealers are

Options Trading: THE COMPLETE CRASH COURSE 3 books in 1: How to trade options: A Beginners’s guide to investing and making profit with options trading + Day Trading Strategies + Swing Trading by Warren Ray Benjamin