This is a bit advanced for the normal topics of this blog, so reader beware. Options are are a type of investing that is often described as gambling. The basics are that you put in a bid to buy a stock or ETF at a certain price and if someone selling sells at that price you pick it up, and basically the reverse if you’re selling.

There are too many variations of this for me to dive into right now, as I’m still trying to learn and wrap my head around how this all works. Now while I see Options lumped together often with Covered Calls, but those are often conflated with high-risk, ‘pay to play’ day trading strategies where the odds are stacked against you.

I’ll add some of this to the glossary and put things at the bottom here as well, but I am early in my knowledge accumulation stage of these things. I feel that there is a large amount of money waiting to be made in these areas, if you are cautious and educated.

The biggest issue with options is that they happen off of 100 share batches. So a stock trading at $10 would need $1000 worth of stock to even have the ability to try options trading. The idea is pretty simple. You buy a stock you’ve researched that you think is going to go up, you buy 100 shares and you sell call options giving people the right to buy those shares at a certain price by a certain date. This can “lose” you money if the price were to skyrocket and you sold at a much higher price, but in most cases it results in either a lapsed option (no sale), or a sale where you get some kind of premium incentive price.

If I’m way off base please let me know, as this is a new learning for me, but I am still firmly in the camp of broad based index funds. Set it and forget it is going to be the best strategy for 99% of people. Though much of this website is dedicated to dividend investing, I think that can still fall into the set it and forget it bucket, especially with Dividend Aristocrats.

~~Miniwing~~
Student, Parent, Investor

Term	Definition
Option Trading	Buying and selling contracts that give you the right (but not the obligation) to buy or sell a stock at a specific price by a certain date. Options can be used to make bets on price movement, generate income, or protect your investments.
Covered Calls	A strategy where you own shares of a stock and sell (write) a call option against those shares. You collect money upfront from the buyer. If the stock doesn’t rise much, you keep both the shares and the money you were paid. It’s one of the most popular ways to earn extra income from stocks you already own.
Puts	A type of options contract that gives the buyer the right to sell a stock at a specific price by a certain date. Most people buy puts when they think a stock price will go down (to make money from the drop) or to protect their portfolio from falling prices.