Call Options Explained for Beginners

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====
Call options are one of the two primary option types, with put options being the other.
In this video, I explain the basics of call options in great detail, covering:
0:00 - Introduction
0:47 - What is a Call Option?
2:10 - The Option Contract Multiplier
3:35 - How a Call Option's Value is Determined
5:20 - A Call Option's "Intrinsic Value"
6:25 - How Call Buyers Make Money
10:03 - How Call Buyers Lose Money
15:00 - What is Extrinsic Value?
16:35 - Call Option Trade Examples Visualized
24:00 - Buying a Call on tastyworks (Trade Demonstration)
33:35 - What is Shorting a Call Option?
34:22 - Short Call Trade Examples Visualized
39:40 - Shorting a Call on tastyworks (Trade Demonstration)
I realize I did not talk about exercising call options in this video, and that's because options are rarely exercised due to the loss of extrinsic value when exercising an option.
Instead, options traders buy/sell options with the intent of profiting from the price changes of the option contracts, and have no intention of ever exercising the options to convert them into shares.
Be sure to leave a comment down below with any questions you may have!
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Options Trading 101: • Stock Options Trading ... tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Project Finance(Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade.

[@projectfinance]

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf Another long one... but think of it as a lecture for a class you're taking. I hope you get a lot out of the details I share in this video and the numerous trade examples I go through. Also, I hope the practical tips I provide related to entering/exiting trades is helpful. Please let me know what you think, and if you enjoy these long-form videos! -Chris

[@projectfinance]

Will do and thanks for the feedback!

[@mtsguides]

@@projectfinance Hi , love your videos. Could you make a video on box spreads ??

[@noorramiz1710]

Thank you so much Chris. .AWESOME!! But i have a question, what will happen if i short at the end of expiration do i need to buy to cover the short position or the system automatically do the offsetting

[@RabahRahil]

super helpful! Thanks Chris.

[@MrAchieveGREATNESS]

@projectoption Hi Chris, at 34:48 when you are explaining a short call option position, you say the breakeven is 'strike + call sale price' (which is what the breakeven is on a long call position). In this case, shouldn't breakeven be 'strike - call sale price'?

[@Rachel-lb5dh]

You should be a college professor. The way you explain & give examples makes it 10x easier to understand. And even though it's really annoying how you continually state a term, followed by it's meaning - it's a great way to help someone internalize the new vocabulary & it's meaning. So, thank you for your videos, they're the best I've seen on KZbin!

[@JohntheNobleSavage]

Correct although you look like you are still in college!

[@lanlert2744]

Hey, just want to say that I appreciate this channel a ton! Did pretty well on the final for my very first Finance class and would not be able to make it without these great videos on projectoption. Thank you.

[@mikedok1]

Love the video. This is the second video completed with notes. The first was the almost 3 hrs Option trading for beginners. The journey continues. Have a happy new year, Chris.

[@zenflowmaster]

The second one I've watched. Nothing new here for my understanding but very competently reinforced and my understanding is consolidated. I like Chris's measured, precise and clear delivery.

[@Oddie99000]

word!

[@luisgonzalez5271]

Great Job & Presentation, I was able to follow along and understand with out a problem. Thank you

[@Winsome2451]

Just watched your presentation and wow!! Great job. I never paid attention to option trading and decided to try and educate myself this morning...glad I found you. Excellent teaching job. You were clear, prepared and explained it so well that I even understood! Thank you so much!

[@c.brunelle1408]

You're really good at what you do! Thank you for being thorough and for explaining the basics in detail for beginners like myself.

[@antoniovergara2350]

Great video. I am just starting to trade options and your videos are being as useful as the most technical books. Thanks a lot!

[@farisqureshi7646]

One of the best video on youtube. I have been searching dozens but this on ehas cleared all of my basic concepts about options.

[@ksmith80]

Omg. You're a great teacher!!! Thanks so much for this. Im new to trading stocks and options and this is very helpful. 🤗

[@Botanica_Gaming]

I had to check the comments section to say you made an even BETTER video. The production value in the video is outstanding!

[@adamromano5260]

This is truly a gift,thank you. Do you have any videos on using stop loss order with option trading?

[@AM-yd5dt]

Amazing content Chris, thank you for explaining call option in lament terms

[@jeannied2368]

This is an AWESOME video. You really explained it so well!

[@projectfinance]

Thank you!

[@bobtedford8014]

Great video. It answered a lot of my questions.

[@burntfishknuckles]

Great video!! This video has explained this subject better than any other video I’ve watched so far.

[@projectfinance]

Thank you so much!

[@saravananchinniah7192]

Hello, thanks for this video. For what all scenarios we need to have shares in hand? Say sell a put, etc...

[@pdiez105]

Thanks so much for the content! I'm not even in university and thanks to these videos I'm starting to understand more about how options work! 🙌 Which books do you recommend to learn more in depth about Options and Derivative Trading?

[@projectfinance]

Of course! Thanks for watching and commenting! There are lots of books on options trading. Many are pretty complicated and the explanations are complex. Check out books by Sheldon Natenberg, Euan Sinclair, Al Sherbin, etc.

[@williamblaket]

Hit after hit! I’m so glad your KZbin exist! 🙏🏾

[@shikhashersinghyadav475]

Great video. You explained better then any text book. Thank you and keep up your great work

[@BiswasPrantik]

Nicely explained, thanks Chris!

[@osuweller]

Leaving a comment for the algorithm. Also love these videos. I have FINALLY found something on you tube with ACTUAL VALUE. I'm working my way through your catalog.

[@trebailey4195]

Thanks for taking the time!

[@jackylalo1]

Thank you Chris, great & simple explanation

[@moeamleh9555]

Great video, thank you for the detailed explanation! Quick question tho! When selling a call option without owning the stock, the leverage is there to ensure you have enough money to exercise the deal at the strike price once the option expires?

[@gabrielhernandez2007]

Great video im new to trading and watching every video you have your informational videos are the most easily understandable videos i have found yet

[@TheCarfanatico]

I finally get it thank you. This is monumental

[@nitinshah2532]

Chris is crystal clear , thanks

[@mikikomurdoch5985]

Thanks, Chris. This video really helps in starting the options trading well-informed.

[@mikikomurdoch5985]

@@charleewayne5164 Yes, I am interested in learning about it.

[@davidhenriques7791]

Best how to video thus far. Well done sir!!!

[@resdid805]

Excellent video! Thank you!!!

[@thomasslinger287]

Absolutely excellent post, thank you very much. 👍

[@padminiloka]

Awesome video, you are the leading you tube channel about options trading. I like it so much!

[@geraldinewilner8394]

Chris, I like listening to the cadence of your voice. I find you easy to listen to and learn from. As a newbie trying to take in so much information, when I have had a limit for the day, and my head begins to nod. I stop, take a nap, and come back:)

[@johnsonbilly4637]

Need help trading??

[@brasielkrisak244]

Hello this is an opportunity for you to grow your income through our investment management account. GUARANTEED TRADING LIMITED is a pool fund that allows you to invest in different market opportunities with estimated fixed returns. We are verified and fully licensed. Create your account, add funds, invest in the desired plan and start seeing your money grow. You don't need much to start, with $30 to $50 you are good to go.

[@dimplekaul6859]

Great Video...thank you! When you enter in any Call Option trade, do you look at Greeks (Delta, Theta etc...) before entering in it? Market trend, stock and IV are key to enter though?

[@markenelzele3779]

Great explanation. I appreciate this.

[@BrawndoQC]

Thanks! That was pretty straight forward. I was bored just watching at my stocks so something to do on the side is fun. QQQJ June 2021 34C 30 contracts.

[@charleskangai4618]

Thanks again Chris. You are dze man!

[@00sra]

36:00 when your selling calls, it’s best to buy in at the lowest price. So in this example the price didn’t really move and the option expired worthless. Would you need to do the actual buying or would it be done by itself?

[@SunniSide1]

This is awesome! Thanks!

[@jaybedreamin]

Hey Chris! Great channel. I recently discovered options trading and have been binging your content ever since, for hours a day. I have a question about selling options tho Let's say I sell a call option where I collect a premium upfront, but the option increases in value. The person who bought the option from me then decides to sell the option to collect their profit, who does the option get sold to? Am I forced to buy it back at a loss? Does it get sold to someone else, and I get to keep the premium I collected in the beginning?

[@seancullen99]

Thank you!

[@DT-of5qq]

Great ob as usual. When will Tastytrade come to Singapore?

[@fredmeliniotis5964]

Good video, thanks

[@healthyeating5378]

Thanks for the great vdo!!

[@TheGREATdEEPs]

Thanks ❤

[@joannelim7585]

Hi Chris, thanks for the clear & complete information. What is your SL? 30% from entry price of option... thank you for your input.

[@JailBreakdatPhone]

Great video bro! thanks for this

[@projectfinance]

You bet!

[@nevabreeze]

Thank you Chris, it is very useful info for beginners.

[@projectfinance]

Glad it was helpful!

[@optiontradingvids3710]

i make vids on options too. feel free to check them out

[@jaysonstewart596]

Great video; you have a gift in teaching and trading ( :) )

[@anthonyr5640]

love the pulp fiction painting. great video btw

[@louisthompson1020]

great information!

[@venkateshac]

Great video!! You'd explained selling an option for profit when option value increases (aka underlying stock price increase). But when you talked about selling an option as strategy, you explained short selling an option. Does selling an option mean short selling an option?

[@wolfgang9570]

Hello Chris: Many thanks for your informative videos. I've been an "investor" since the early 80's. Fundamentals aside, I would submit that options are little more than a gambling crap shoot and not "investing" in any sense of the word. Their appeal is obvious......to a gambler. The house , however, has the odds stacked in their favor by a huge margin. Thoughts?

[@youngb.wiseman3576]

Another great video, watched it twice because I really want to understand before I dive in!

[@gusbrahfernandez4125]

Same 😩 hopefully everything goes well. This guys has helped me a lot.

[@youngb.wiseman3576]

@@gusbrahfernandez4125 good to hear, wish you the best

[@razaus]

Amazing videos!

[@ronpeltz1717]

Thank you. I think I am getting it. So let me understand this... If expired and I didn't execute, I don't pay the premium?

[@narindersingh6980]

Thank you

[@timothyford3065]

Great video!

[@mertyasar78]

actually people are selling these type of education videos for high prices, but this guy is doing this free for all of us. I am really lucky to meet you man, you are simply awesome. Thank you one more time !

[@projectfinance]

Thank you for the comment! I really appreciate what you've said here! This type of information should not be behind a paywall.

[@anniepadilla1327]

Thank you for all the videos. Awesome information. I have a question if you don't mind: If I am long a call in stock xyz, expiry out about 2 months, and I don't own any of the stock, am I able to sell covered calls on those calls at shorter expiry? Example: Long AAPL 120C Nov 20 2020 exp Sell Covered call AAPL 118 Oct 02 exp Thanks in advance for all your help!

[@aceslj1]

Excellent.

[@woyeshinibaba]

thanks Chris, learned a lot from you quick question, 38:36 "the call option's value actually got close to 0", what does this mean? isn't the call option price close to $25 which is the intrinsic value as the contract matures? thanks!

[@carriecheng6579]

Great video! Very informative!!

[@projectfinance]

Thank you!

[@brasielkrisak244]

Hello this is an opportunity for you to grow your income through our investment management account. GUARANTEED TRADING LIMITED is a pool fund that allows you to invest in different market opportunities with estimated fixed returns. We are verified and fully licensed. Create your account, add funds, invest in the desired plan and start seeing your money grow. You don't need much to start, with $30 to $50 you are good to go.

[@yosbelperez4774]

Great video 👍 🙌

[@projectfinance]

Thank you!

[@bitsnbots7541]

Well done 👍

[@projectfinance]

Thank you!

[@danielmanahan692]

thanks for taking one for the team here. you could just paper trade too for us. no reason to lose real money

[@projectfinance]

I disagree. Paper trading is not real trading. The fills you get when paper trading are not necessarily what you'd get trading for real. A couple dollars lost is nothing in the grand scheme of things. Happy to do it to demonstrate real trade entries.

[@chiayeungong2593]

Thank you Sir .

[@projectfinance]

Welcome!

[@danielmanahan692]

suppose on monday I buy a call and on that same day monday I exercise my option to buy the stock at the call option strike price what now? do I have to wait until expiration on friday to receive the stocks? do I get the stocks immediately at the moment of the choice? can I then sell calls on that same stock that I just purchased on that same monday? and does the mechanics of the transfer of the call option work identical to selling a put? where the transfer happens immediately on that same money and both parties exchange and can do something with them? or do you have to wait until after expiration friday and have to wait until monday morning to sell a potentially less valuable stock as after hours on weekends can dramatically differ in a gap up or down from friday's close.

[@optiontradingvids3710]

most option traders rarely exercise their right. all they do is sell their contract call or puts for a higher premium. in other words all you're doing is exiting the trade or selling to close your position for a higher premium. took a course on options from experienced option traders and that's where i learned this from

[@rafaelschulz6264]

Excellent. Teach me

[@TheAKfactor]

This is amazing

[@projectfinance]

Thank you thank you

[@kastha4484]

goooooooood stuff

[@eldean0]

The more likely scenario @ 9:48 🤦🏻‍♂️ .. great video

[@luckycui3968]

Very good demonstration on buying Call option and close it. Really good for beginner. Thanks a lot. Just have a question, after buying a Call option, when I chose to Close Position, do I have to wait for somebody to buy it (like the stock)?

[@projectfinance]

Yes, but you won't have a problem selling the option if you are trading very active option contracts / well-known stocks like TSLA, AAPL, SPY, IWM, etc.

[@luckycui3968]

@@projectfinance Hi thanks very much for reply. How to identify the ticker is very active? open interest?

[@jerrynix5206]

Great class Chris! I really like these longer classes alot, I learn so much from your videos.

[@projectfinance]

I'm glad you liked it! Put options coming up next.

[@optiontradingvids3710]

i have vids on options as well check them out

[@Eastbaypisces]

@@optiontradingvids3710 u still got them??

[@cblacks4553]

Im confused i saw a few of your videos and you choose a strike price below what the stock is trading for why is that am i missing something? I thought the strike price is the price you believe the company would go to with the time frame you chose

[@itsallgoodbro9080]

This guy is amazing at teaching

[@johnsonbilly4637]

You can say that again

[@weheart9306]

Not sure if I missed it and having trouble finding the answer, but can you close a call option on expiration date or do you have to do it the Thursday before?

[@captok36]

Question. In your 2nd example at the 22:00 mark. Your making money, everything is good. Do you have to sell the option before expiration? If you let it expire what happens?

[@deans_machines]

What time chart do you use for these options trade? Is it a 1 day chart?

[@cletuschukwu]

Great video and by the way, I just opened an account with TW with the code you gave us. I have a question about the AAPL call option example where the Strick price is 200 and the Share price is 220.... If I am not mistaken, the $20 call option price is arbitrary correct. It does not have any relationship with the difference between the strike price and the share price (in other words, the $20 call option price was not derived from Share price or 220 - strike price 200). Also the $40 is also arbitrary?? Correct?

[@jacobloper8571]

Chris, if you wrote a book, I would buy it and read it. 👍

[@edwinmasi7994]

Thanks for your video Chris. When you explained that selling a call option has unlimited risk potential, is this the case only if you sell the call alone. If you already own 100 shares of this company is this unlimited risk removed?? thanks in advance

[@fredmeliniotis5964]

Chris, I'm new to trading in general (6 months) and I'm having trouble understanding how I profit off of the strike price on call options. If a stock is priced at $25 and I believe that it will move up to $26 before a option expires what should my strike price be ? I believe it should be between $25 and $26 and that the value of of option has to be above the strike price in order for me to profit. My question is if the I expect the stock to hit $26 do I set the strike in the $25 range or do I put in the exact strike price I expect the stock to hit ? Thanks, Fred

[@Eisraman]

Excelent video

[@projectfinance]

Thank you!

[@gamiensrule]

Thank you. Sooo. Question. If someone had bought a call option on GME a few weeks before it spiked to 400 bucks, would they have been able to sell it for a huge profit or would that have been unlikely due to the high volitilty?

[@codesymphony]

high volatility would increase the price in your favor

[@ikennaokoye7858]

Can you do an example of a stock price that's out-of-the-money? I'm not grasping how the premium per share cost would work for a strike that's OTM.

[@highestvirtue1892]

Hi I am new and a little confused. When I buy a call option do I need to buy the shares to in case the buyer of my option wants to exercise his right to buy the shares? Also what exactly is a naked call option?

[@monerboat]

Can you go over the difference between buying itm and otm call options? And how the rate of return would differ?

[@optiontradingvids3710]

i like to buy itm options. i think they are safer to buy though they cost more. itm options ca nalso have better returns

[@changesinlife7009]

@@optiontradingvids3710 hey beautiful, what's an itm option?🤨

[@rm-on9co]

can you explain a coverd call and put option

[@MrAchieveGREATNESS]

@projectoption Hi Chris, at 34:48 when you are explaining a short call option position, you say the breakeven is 'strike + call sale price' (which is what the breakeven is on a long call position). In this case, shouldn't breakeven be 'strike - call sale price'?

[@projectfinance]

No, the breakeven calculations are the same. At the call strike + entry cost/premium, the call option will have intrinsic value equal to the entry price of the trade. At expiration, that means the option will be worth what it was paid/sold for and no profit/loss will occur.

[@brasielkrisak244]

Hello this is an opportunity for you to grow your income through our investment management account. GUARANTEED TRADING LIMITED is a pool fund that allows you to invest in different market opportunities with estimated fixed returns. We are verified and fully licensed. Create your account, add funds, invest in the desired plan and start seeing your money grow. You don't need much to start, with $30 to $50 you are good to go.

[@happyhamster1411]

does the price of the call option come out of the intrinsic value? Because I was looking at a call for $17 and the break even price was around $18.5

[@praveen9916220520]

When selling call option and price went down significantly in relation to strike price I should have a high gain or is It capped at the premium I received when entering the trade??

[@tjm2174]

Same question as Marko's. When or should i say how do you make money after buying a call? Do you sell them right away? Is there a expiration date on when you have to sell them after you buy? If you explained this in your video already can you tell me at what time on video.

[@bellej9349]

how come call option strike price is lower than the initial stock price? isn't it supposed to be put options then

[@4a6vamsi]

when the call option price will increse and decrease for a stock?

[@JacquesSteffen]

Hi Chris. I have just started my venture into Options Trading and have decided to use you as my tutor. At this moment i only have one question to you, which is confusing - you speak of "call and put", yet the broker platforms has a "buy and sell" option. Is there a difference?

[@Eastbaypisces]

yes there is look up

[@k1nkzx3]

LET'S GO

[@songoflovemetalofficial]

Should we put stop loss kn options spreads?