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Options Trading

Two payoff charts at expiration: a long call with strike 100 and premium 5 breaks even at 105 and gains as the price rises; a long put breaks even at 95 and gains as the price falls. Maximum loss for both is the 5 dollar premium.

Payoff at expiration for a long call and a long put (strike $100, premium $5). Illustration only.

Options are contracts that give you the right, but not the obligation, to buy or sell an asset at a set price before a set date. This section covers how options work, the common strategies, and how to manage risk when trading them.