Category: Option Basics

We are using Fidelity in this example.

First, you want to go to the Research & Quotes page for your stock. On the page, click on the option chain (representing by the link icon) link as shown below.

On the option chain page, you can select the expiration dates that you are interested in.

On the right side, there are PUT options.

To sell a PUT option, you can click on the Bid price.

You should then be shown a trade popup window where you can provide additional information. Please make sure it is a “Sell To Open” action for entering a trade.

Options trading can seem complex at first, but once you learn to decode the lingo, it becomes much easier.

CALL Example

When you see an option label like “AAPL $210 7/19 CALL”, it might look like a jumble of numbers and letters—but each part carries important meaning. Here’s how to read it:

• AAPL – This is the ticker symbol for Apple Inc., the underlying stock.
• $210 – This is the strike price. It’s the price at which the option buyer has the right to buy 100 shares of AAPL.
• 7/19 – This is the expiration date. The option is valid until July 19. After that date, it expires and becomes worthless if not exercised.
• CALL – This indicates the type of option. A CALL option gives the buyer the right (but not the obligation) to buy the stock at the strike price.

Example: If AAPL is trading at $220 before July 19, this $210 CALL is in-the-money, since the buyer can buy the stock at $210 and immediately sell it at $220, locking in a $10 per share gain (minus the premium paid). If AAPL stays below $210, the option expires worthless.

PUT Example

Let’s break down what “HOOD $90 7/25 PUT” means, step by step:

• HOOD – This is the ticker symbol for the underlying stock, in this case, Robinhood Markets, Inc.
• $90 – This is the strike price. It’s the price at which the buyer of the PUT option has the right to sell 100 shares of HOOD.
• 7/25 – This is the expiration date, meaning the option contract is valid until July 25th. After that date, it expires.
• PUT – This tells us the type of option. A PUT option gives the buyer the right (but not the obligation) to sell the stock at the strike price ($90).

Example: If HOOD is trading at $85 before July 25, the buyer of this PUT can sell it at $90, making a $5 profit per share (minus the premium paid). On the other hand, if HOOD stays above $90, the option will likely expire worthless.

Understanding each part of the contract helps you make better decisions when buying or selling options. Always pay attention to the strike, expiration, and type—these details determine how the option behaves in the market.

When trading options, it’s important to understand how the strike price compares to the current price of the underlying stock. This relationship determines whether an option is In-the-Money (ITM), At-the-Money (ATM), or Out-of-the-Money (OTM)—a key factor in how much the option is worth and how likely it is to be profitable at expiration.

A call option is in-the-money when the stock price is above the strike price, because the buyer has the right to buy the stock at a lower price. A put option is in-the-money when the stock is below the strike price, since the seller can sell the stock at a higher-than-market price. Conversely, options are out-of-the-money when they have no intrinsic value—calls with a strike price above the stock price, or puts with a strike price below it. These are cheaper to buy but riskier to hold.

An option is considered at-the-money when the stock price is very close to the strike price. These options typically have the highest time value and are highly sensitive to changes in the stock’s movement. Understanding where your option stands in relation to the stock price helps in choosing the right strategy—ITM options cost more but are safer, OTM options are cheaper but more speculative, and ATM options are ideal for quick directional moves.

A CALL option is a contract that gives the buyer the right, but not the obligation, to buy a stock at a specific price (called the strike price) before a certain expiration date. Investors usually buy CALL options when they believe a stock’s price will go up, because the value of the CALL increases as the stock rises above the strike.

When you sell a CALL option, you’re agreeing to sell the stock at the strike price if the buyer decides to exercise it. In return, you receive a premium upfront. If you already own the stock, this is known as a covered CALL, and it’s a popular way to earn extra income while holding your shares.

CALL options can be used for speculation, income, or hedging — but like all options, they carry risks. It’s important to understand how they work and to use them on stocks you’re comfortable trading or owning.

A PUT option is a type of financial contract that gives the buyer the right, but not the obligation, to sell a stock at a specific price (called the strike price) before a certain date. Investors typically buy PUTs when they believe a stock’s price will go down, because the value of a PUT increases as the stock drops below the strike price.

On the other hand, when you sell a PUT option, you’re agreeing to buy the stock at the strike price if the buyer decides to exercise it. In return, you get paid a premium upfront. If the stock stays above the strike price, the option expires worthless, and you keep the premium as profit.

PUT options are a powerful tool for both protecting a portfolio and generating income — but they do come with risk. That’s why they’re best used when you understand the underlying stock and are prepared to either trade or hold it if assigned.

When trading options, the “Greeks” are essential tools that help you understand how an option’s price reacts to changes in the market.

Delta measures how much the price of an option is expected to move for every $1 change in the underlying asset. For example, a call option with a delta of 0.40 means the option’s price will rise approximately $0.40 if the stock rises by $1. Delta also hints at the probability of the option finishing in the money—so a 0.40 delta implies about a 40% chance.

Theta represents time decay. Options lose value as they approach expiration, especially if they are out-of-the-money. A theta of -0.05 means the option loses $0.05 in value each day, all else being equal. This is why selling options—especially short-dated ones—can be profitable: time is working in your favor. Gamma measures how much delta changes when the stock price moves. It helps predict how fast your position’s exposure (delta) is increasing or decreasing, particularly near the money.

Vega gauges how much the option price will change with a 1% change in implied volatility (IV). If vega is 0.10 and IV increases by 1%, the option price rises $0.10. High vega is beneficial for buyers during volatile times but a risk for sellers. Understanding these four Greeks gives you deeper control over your trades and risk management—especially when combining strategies like spreads or ladders.