What are Options?

The price at which the underlying asset can be bought or sold.  

The date by which an option contract must be exercised.  

To "exercise" an option means to utilize the right to buy (in the case of a call) or sell (in the case of a put) the underlying asset. 

The total cost of purchasing or selling an option, influenced by the underlying stock's price, the strike price, and the time remaining until expiration. 

A covered call is an options trading strategy used by investors to generate income from stocks they already own. Here's how it works:

• You own shares of a stock.
• You sell a call option on that stock, giving someone else the right (but not the obligation) to buy your shares at a specific price (called the strike price) before a certain date (the expiration date).
• In return, you receive a premium (payment) for selling the option.

• To generate extra income from stocks you already own.
• To potentially sell your stock at a higher price than its current market value.
• To provide a small cushion against minor declines in the stock price (thanks to the premium received).

• Limited  upside: If the stock surges above the strike price, you miss out on gains beyond that price.
• Stock declines: You still bear the downside risk if  the stock drops significantly.

A cash-secured put is an options strategy used by investors who are willing to buy a stock at a lower price than its current market value. Here's how it works:

• You sell a put option on a stock you’re interested in buying.
• You set aside enough cash to buy the stock if the option is exercised.
• The put option gives the buyer the right to sell you the stock at a specific strike price before the expiration date.
• You receive a premium for selling the put.

• To generate income while waiting to buy a stock at a lower price.
• To potentially acquire stock at a discount.
• To take advantage of neutral to bullish market sentiment.

• If the stock drops significantly below the strike price, you’re still obligated to buy it at the higher strike price.
• You could end up owning a stock that’s worth less than what you paid.

A put option gives you the right (but not the obligation) to sell a stock at a specific strike price before a certain expiration date.

• Hedging Investors use puts to protect their portfolio or individual stock positions from losses. For example, if you own a stock and buy a put, you’re insured against a drop below the strike price.  
• Limit Risk Your maximum loss is the premium you paid for the put. If the stock doesn’t fall, you don’t exercise the option.
• Leverage You can profit from a downward move in the stock with a relatively small investment.

A call option gives you the right (but not the obligation) to buy a stock at a specific strike price before a certain expiration date.

•  Leverage You can control 100 shares of a stock with a relatively small investment (the premium), rather than buying the stock outright.
• Limited Risk Your maximum loss is the premium you paid for the option. If the stock doesn’t go up, the option expires worthless. 
• Unlimited Upside If the stock rises well above the strike price, your profit potential is theoretically unlimited.
• Speculation Traders use calls to bet on short-term price increases without tying up a lot of capital.