Options trading
Recently I have been dabbling myself in options trading. I therefore decided to share my knowledge of what I have been reading all along

There are 2 types of options trading

• calls
• Puts

1. Both of these options give the buy of this option the right to buy or sell stock at the strike price on expiration date but NOT the obligation.
2. Each option contract is of 100 dollars size.
3. Options expire on the 3rd friday of each month.
4. Options are easier to work with if your account size is smaller.
5. Options tend to be complicated and requires understanding and lots of virtual trading before you can consider yourself ready to trade options.
6. Call prices go up when the underlying stock goes up. Example would be option prices go up > 50 cent if In-the-money. option prices tend to go up upto 50 cents At-the-money and option prices tend to increase less than 50 cents for Out of the money.
7. The same logic applies for puts except, the put prices go up as the stock prices go down.
8. Option prices also tend lose their time value at passage of time. At the money and out of money calls/puts expire worthless and in-the-money options expire at intrinsic value on the the date of expiration.
9. Therefore you always need to play ball with time decay and price change of the underlying.
10. Trading tricks to apply
    If you expect stock to go up
    Starting trade -Buy a long call preferably a in the money or at the money (BTO=Buy to Open)
    Stop Loss - You have to guard yourself against movement of stock downwards. If the underlying stock goes down then options price would go down. Therefore if you purchased original option for 5 dollars (500 dollars + commision) for entire purchase. Place your stop loss at 3.5 - 4.0 dollar
    Exit - You can exit any value above the purchase price. At expiration if the stock is exercised (ie the stock price > strike price of the call), the stock would be assigned to you. Make sure you have enough money in the account to exercise the options. Also if you do not pay attention to time decay you may potentially end up in a loss.
    Remember: The stock has a time value even a minute before expiration but can lose all that at expiration.
    
    If you expect stock to go down
    Starting trade -Buy a put preferably a in the money or at the money (BTO=Buy to Open).
    With a PUT you have to think opposite. With fall in stock price the value of a Put goes UP!!!
    Stop Loss - You have to guard yourself against movement of stock upwards. If the underlying stock goes down up, options price would go down. Therefore if you purchased original option for 5 dollars (500 dollars + commision) for entire purchase. Place your stop loss at 3.5 - 4.0 dollar
    Exit - You can exit any value above the purchase price. At expiration if the stock is exercised (ie the stock price <>

There are other trading tricks like doing bull call spreads, bear put spreads and covered calling. It is better to read books published by CBOE for a better understanding.