# Learn Options Plain explanations of how stock options work, from the first contract to the strategies Options Beacon reviews. Every example states its numbers, every article lists its sources. Canonical page: https://optionsbeacon.pro/learn ## Start here 1. [What is an option?](https://optionsbeacon.pro/learn/what-is-an-option.md) 2. [Calls and puts](https://optionsbeacon.pro/learn/calls-and-puts.md) 3. [Option buyers and sellers: rights and obligations](https://optionsbeacon.pro/learn/option-buyers-and-sellers.md) 4. [Strike price, expiration date and premium](https://optionsbeacon.pro/learn/strike-expiration-premium.md) 5. [One option contract is 100 shares](https://optionsbeacon.pro/learn/option-contract-size.md) 6. [How to read a payoff diagram](https://optionsbeacon.pro/learn/how-to-read-a-payoff-diagram.md) 7. [Moneyness, intrinsic value and time value](https://optionsbeacon.pro/learn/moneyness-intrinsic-and-time-value.md) 8. [How to read an option chain](https://optionsbeacon.pro/learn/how-to-read-an-option-chain.md) 9. [Exercise, assignment and expiration day](https://optionsbeacon.pro/learn/exercise-assignment-expiration.md) 10. [The main risks of options](https://optionsbeacon.pro/learn/risks-of-options.md) 11. [Cash-secured put](https://optionsbeacon.pro/learn/cash-secured-put.md) 12. [Covered call](https://optionsbeacon.pro/learn/covered-call.md) 13. [The wheel strategy](https://optionsbeacon.pro/learn/wheel-strategy.md) ## Option basics What an option is, who holds which right and which obligation, how a contract is quoted, read and settled, and what can go wrong. - [What is an option?](https://optionsbeacon.pro/learn/what-is-an-option.md): An option is a contract that gives its holder the right, and not the obligation, to buy or to sell 100 shares of a stock at a fixed price until a fixed date. - [Calls and puts](https://optionsbeacon.pro/learn/calls-and-puts.md): A call option is the right to buy 100 shares of a stock at the strike price, and a put option is the right to sell 100 shares at the strike price, until the option expires. - [Option buyers and sellers: rights and obligations](https://optionsbeacon.pro/learn/option-buyers-and-sellers.md): The buyer of an option is the holder of a right and has no obligation. The seller, called the writer, is obliged to fulfil the contract when the holder exercises, and receives the premium for taking that on. - [Strike price, expiration date and premium](https://optionsbeacon.pro/learn/strike-expiration-premium.md): The strike price is the price per share at which the shares of an option are bought or sold, the expiration date is the last day of the option, and the premium is the price paid for the option. - [One option contract is 100 shares](https://optionsbeacon.pro/learn/option-contract-size.md): One standard stock option contract covers 100 shares of the underlying stock, so every quoted premium is multiplied by 100 to get the price of one contract. - [How to read a payoff diagram](https://optionsbeacon.pro/learn/how-to-read-a-payoff-diagram.md): A payoff diagram is a chart of the profit or loss of an option position at expiration for every price of the underlying stock. - [Moneyness, intrinsic value and time value](https://optionsbeacon.pro/learn/moneyness-intrinsic-and-time-value.md): Moneyness is where the price of the stock stands against the strike price of an option, intrinsic value is the amount by which the option is in the money, and time value is the rest of its premium. - [How to read an option chain](https://optionsbeacon.pro/learn/how-to-read-an-option-chain.md): An option chain is the table of every listed option on one stock, arranged by expiration date and strike price, with the calls on one side and the puts on the other. - [Exercise, assignment and expiration day](https://optionsbeacon.pro/learn/exercise-assignment-expiration.md): Exercise is the use of the right in an option by its holder, assignment is the notice that obliges a writer to fulfil the contract, and expiration day is the last day on which either can happen. - [The main risks of options](https://optionsbeacon.pro/learn/risks-of-options.md): The main risks of options are the loss of the whole premium for a buyer, a loss far larger than the premium for a seller, and the effects of leverage, of time and of assignment on both. ## Pricing and volatility What moves the price of an option between the day it is traded and the day it expires, and how each effect is measured. - [Delta](https://optionsbeacon.pro/learn/delta.md): Delta is the estimated change in the price of an option for a rise of $1 in the price of the underlying stock. The delta of a call lies between 0 and 1 and the delta of a put between -1 and 0. - [Theta and time decay](https://optionsbeacon.pro/learn/theta-time-decay.md): Theta is the estimated change in the price of an option as one day passes and everything else stays the same. Time decay is the loss of time value that theta measures. - [Implied volatility](https://optionsbeacon.pro/learn/implied-volatility.md): Implied volatility is the volatility that, put into an option pricing model, gives the market price of the option. It is quoted as a yearly percentage and says how much movement of the stock the premium pays for. ## Income and protection strategies Positions that collect a premium or limit a loss, each with what it can make, what it can lose and what happens when it is assigned. - [Cash-secured put](https://optionsbeacon.pro/learn/cash-secured-put.md): A cash-secured put is a put option that is sold while the seller keeps enough cash to buy 100 shares at the strike price if the put is assigned. - [Covered call](https://optionsbeacon.pro/learn/covered-call.md): A covered call is a call option written against 100 shares of the stock that the writer owns. The writer receives the premium and must deliver the shares at the strike price if the call is assigned. - [The wheel strategy](https://optionsbeacon.pro/learn/wheel-strategy.md): The wheel strategy is a rotation between two positions on one stock. Cash-secured puts are sold until one is assigned, then covered calls are written on the shares until they are called away, and the rotation starts again. - [Collar](https://optionsbeacon.pro/learn/collar.md): A collar is a position of 100 shares, one put bought with a strike price below the stock price and one call written with a strike price above it. The put sets a floor under the loss and the call sets a ceiling on the gain. ## Glossary [Options glossary](https://optionsbeacon.pro/learn/glossary.md): 70 terms, one definition each. Every article links to the terms it uses. --- Educational content from Options Beacon. It is not investment, tax or legal advice, and not a recommendation to buy or sell any security or to use any strategy. Options involve risk and are not suitable for all investors; an option seller can lose far more than the premium received. Before trading options, read [Characteristics and Risks of Standardized Options](https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document). Articles are drafted with AI assistance and checked against the sources listed on each page.