Stock Options Explained

Correction: At 4:20, the graph in the top left-hand corner is slightly off; for total return, the curve should not intercept at (30,0), but rather should be shifted slightly to the left so that the bend in the line occurs at (30,-2). Sorry for the blunder.
Option Pricing Factors:
- Underlying stock price (higher = higher call premium, lower put premium)
- Underlying stock price volatility [expected] (higher = higher option premium)
- Underlying stock dividends (higher = lower call premium, higher put premium)
- Option's strike price (higher = lower call premium, higher put premium)
- Time until expiration (longer = higher option premium)
- Interest rates (higher = higher call premium, lower put premium)
Intro/Outro Music: www.bensound.com/royalty-free...
Episode Music: freemusicarchive.org/music/Pod...
DISCLAIMER:
This channel is for education purposes only and is not affiliated with any financial institution. Richard Coffin is not registered to provide investment advice and as such does not provide recommendations on The Plain Bagel - those looking for investment advice should seek out a registered professional. Richard is not responsible for investment actions taken by viewers.

[@ThePlainBagel]

Happy Friday everyone! Have you ever used stock options, or do you prefer sticking to traditional investments? Let me know!

[@raajrajan1956]

plain investing

[@shawnharry4135]

Traditional investments for sure

[@h7opolo]

regular yet, still new.

[@nightrider301]

I have had good results writing covered calls

[@David-dw2iq]

@@nightrider301 What broker do you use for you covered calls? did you take an investing course prior to investing or just "go for it". I'm looking to get started in "covered calls", but am very new. Any advice woul dbe much appreciated.

[@BodyworkASMR]

Next please upload “stock options explained, explained”.

[@robertsmith747]

First Massage 🤣

[@povitti]

😄😆😅🤣😂

[@bartholomewlyons]

😄😄😄😄😄

[@disguysn]

I got about half of it. The explanations of the complex trades went over my head, but at least I found out what a covered option meant.

[@johannamarce8917]

jajajajja

[@EddyFisico]

I'm a physicist and I had trouble following, now I understand how people feel about math.

[@bobbackward6461]

I'm a security officer hoping to be a physicist in my next life. What's it like?

[@EddyFisico]

@@bobbackward6461 i think it is the same as you, we ignore some things and ignore others

[@shaynehughes6645]

@@EddyFisico brilliant response

[@wowthatsalowprice8942]

@@EddyFisico Fisico more like Physic-o haha

[@tevitamotulalo3909]

This should be easy for you...

[@fowlraven9730]

You lost me at derivatives

[@ahsanmohammed1]

Seems like he meant to loose people! He wasn’t explaining to people who don’t know. He was showing off to people who already knew!

[@robertsmith747]

Lol same here

[@kaiwenzhao2225]

He’s speaking another language that I don’t even understand.

[@sybilcasilac8471]

My trauma from calculus immediately kicked in .

[@KevinementD]

It was a bit complex but I think I got it. If you buy a stock, you will take all the ups and lows. An option basically means that you aren’t buying the stock just yet, but you are reserving the option (hence the name) to buy the stock at its current price for a certain amount of time. The option seller asks for a premium for you to have this option. If the price goes up within that time, you use your option to buy the stock. If the price goes down, you don’t use your option to buy the stock and your loss is at most as high as the premium. Similarly if you have the stock already, you can also buy an option to sell the stock, which almost the same way. Someone gives you the option that you can smell a stock to him at the current price. For this option he also asks for a premium. If the stock price goes up, you don’t use your option to sell, if it goes down, you use your option to sell and you’ve minimised your loss to the premium. Of course the disadvantage is that if the stock goes up, you will have paid a premium for nothing. It’s basically an insurance. If you have a car insurance but never an accident, then your insurance was not worth it, but if you have an accident, the insurance will take the loss.

[@dylant830]

It's important to note that options contracts come in terms of 100 shares. Really pumps up the possible gains and losses more than a beginner would expect!

[@zombie4910]

Wow, 100 Shares of Apple would be worth $15,000 right now, it limits people with short cash a little...

[@danielcreatd872]

Apple stocks have low volatility so option prices should be much lower.

[@Elestar60]

@@beefcake1876 you’re a genius

[@piffdaddy7661]

You’d think he would have mentioned this small detail. Lol

[@skipfred]

​@@zombie4910The option doesn't cost the whole price of the share contract

[@11O100]

I've made an absurd amount of money in options. I've also lost it all because of options. Lol

[@jameslouis5359]

Would you mind telling us how many times you multiplied your starting capital before it up s*it's creek

[@11O100]

@@jameslouis5359 Seven times or 700% gain. The next trade I was either going to be a millionaire or I was going to be broke. Guess who isn't a millionaire. 😂

[@90deltaderivatives35]

My name how come you didn’t take your capital and than play with you wins??

[@adambibinski180]

@@90deltaderivatives35 it's always the ego or the greed

[@sebastianweber8024]

@@adambibinski180 not always, that's what sets people apart.

[@MP-cf3pr]

I jumped forward to the end of the video and am now qualified to YOLO my little brothers college fund. ✋ 💎 🤚 🚀

[@joydeepchaturvedi]

Saw the comment after just watching Dumb Money on Netflix, this is perfect

[@chimphead73]

me watching my grandmas life savings disappear on a "well calculated" yolo

[@zombierevel]

it was calculated, but damn I am bad at math.

[@zachariemdn]

Well calculated be like omg Jupiter and Saturn are gonna align i need to quick buy 10k of cum coin with 125x leverage

[@JamesJoe-uk8pj4215]

I learned that the stock market was a rich man's game (yes, grandparents lost it all back then and preached that forever) but I've been around long enough to really taste how great it can be. To be profitable, with inflation at 6.1% These are surely desperate times, but in my opinion, there is no market condition that a good financial advisor cannot navigate, especially those that have existed since the crisis of 2008 and before.

[@Vinnie-ng3zx643]

Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are alot of wealth transfer in this downtime if you know where to look.

[@user-yx8fo4ni7e]

Is there any chance you could recommend who you work with? I've wanted to make this switch for a very long time now, but I've been very hesitant about. I'll appreciate any recommendation.

[@LuthaKing-oo5px32]

I’ve been looking to switch to an advisor for a while now. Any help pointing me to who your advisor is?

[@Vinnie-ng3zx643]

STEPHANIE KOPP MEEKS she is whom i work with look her up..

[@LuthaKing-oo5px32]

Thanks for sharing, I just looked her up on the web and I leave her a message.

[@salinascgs]

My hunt for more options explainer videos continues after watching this one.

[@maxwellschaphorst8050]

This is the first time I've actually understood puts & calls, so for what it's worth you're the best explainer on KZbin, and I've been trying to understand this for a while.

[@Ezm42069]

I need a tutorial that explains it to actual beginner dummies, not like an experienced stock broker lol

[@JonathanBelloso-tz8mz]

Yeha right

[@JonathanBelloso-tz8mz]

This shit to complicated

[@Ezm42069]

@@JonathanBelloso-tz8mz i finally got it lol read a few free books on amazom but totally worth it

[@JonathanBelloso-tz8mz]

Ezm really lol i don’t get it at all

[@JonathanBelloso-tz8mz]

Ezm let’s talk wat ur number

[@mteevie1609]

I'm more confused now after watching the video

[@nerdysuzcategui3811]

Cheers for this, been searching for "what is options" for a while now, and I think this has helped. Have you ever come across - Jenameron Penny Smackdown - (just google it ) ? Ive heard some great things about it and my mate got great success with it.

[@thizz_kidd6544]

You dumb?

[@Allen_lena]

As soon as I saw the box spread I knew where the "It literally can't go tits up, I've done the math" came from. This was the math.

[@brianwilliams9997]

bought GME as my first stock -instantly down 80%. Pray for me.

[@Topthingnas_]

It’s up now

[@hanssolo1196]

You bought a stock based on social media lol

[@RyanWillis227]

@@hanssolo1196 which if you got in early and realized then you would have done very well. Not a lot wrong with social media if there's valid information being shared.

[@joshuafelstead2056]

This is why people short GME...

[@samuelsirota2816]

Just HODL monkee

[@tiredleeches771]

Very informative, I still struggle comprehending how it all works but this is the best video I've seen yet about it

[@cristian0523]

Box spread = risk free returns lul

[@1Ryan4]

wsb for life

[@sterlingarcher3981]

Literally can't go tits up

[@DeepfriedBaby]

Well you do own the stock so if it tanks...

[@taufiqutomo]

risk free returns are the reason of so much failure to understand modern finance.

[@deadshot6554]

1ronyman tought so too

[@sheepmellow]

This was one of the better breakdowns on options I've ever watched. Thanks Plain Bagel, you guys are really damn clear!

[@jasongao3637]

Your explanation helps me have a clear picture of options. Particularly the four curves, which are the most concise and precise demonstrations I’ve ever seen. Good work👍

[@menumlor9365]

I love how you explained this much simpler to us common folk who don't options trade on the daily.. It still requires more work to understand the complexity. This is the reason i subscribed.

[@NihongoLoFi]

This is THE BEST video for option trading I have ever seen thanks so much!

[@kassandrarivera3578]

Your explanations are so easy to understand. Thank you!

[@jakefromstatefarm9721]

15 seconds in and i'm totally lost.

[@kishanshah9887]

A Tip for anyone watching - understand the definitions prior to watching the video - it'll help massively!

[@Squilfinator]

I just wanna take the time to say thank you so much for your videos. These combined with Investopedia are becoming my primary source for my foundational knowledge in investing. And the more I learn the more excited I become about learning more. Sometimes it is hard for me to grasp certain concepts but when I am patient with myself and allow room for growth over time, the stress of becoming knowledgeable is far less. A little at a time pays off big in the end. It's almost like I'm investing already! Except I'm investing my time to learn about investing money! STONKS!

[@krypton9984]

Brilliant video - really clear and well presented. Gotta be one of the best I have seen. Yes - a little fast moving for a beginner, but I loved it

[@RandomShowerThoughts]

this might be one of the best videos ive ever watched

[@thingshappen9199]

The most confusing one for me at the same time. Phew

[@ahsanmohammed1]

He wasn’t explaining to people who don’t know. He was showing off to people who already knew!

[@thingshappen9199]

@White Wolf Some of us have high IQ in other areas like ...I dunno? Street cred? Or perception? But very low on this shite. Not that I've looked into Calls and Puts much anyways...

[@thingshappen9199]

@White Wolf i edited it a bit. xD

[@thingshappen9199]

@White Wolf how you can loose infinite money....

[@quentindaniels7460]

Options (How They Work) - 0:37 Buying/Shorting a Stock - 2:37 Buying and Selling Options - 8:46

[@carolinedavis6013]

Thank you so much for taking the time to put together this video! I think I’ve found my new favorite channel. :)

[@victorespino5650]

Currently taking a class on selling options. Great stuff here, you nailed it exactly and I learned something too lol

[@EricSmyth4Christ]

I listened at 2x speed and understood everything easily Said no one ever

[@Lennartnieuwland]

I did understand this but I've been paper trading them for a year now and have been studying them.

[@gu3sswh075]

EricSmyth14 I could've watched at 0.5x and I'd still have to rewatch..

[@marianferguson2224]

Your lessons extremely helps. Thank you for it, man

[@928dawson6]

Why the hell couldn't the other 57 thousand people who made videos about this explain it this simply!!! Thanks brother!

[@deadpenguinss]

I'm drunk and my brain hurts

[@ywpmooncity3623]

This is a really impressive explanation. Thank you for doing this lovely video.

[@ThePlainBagel]

Thanks for the kind words!

[@ywpmooncity3623]

They are really helpful. Could I know what software did you use to produce this?

[@ThePlainBagel]

I use Adobe Premiere (CS6 I believe is the version).

[@saxonelyaman9212]

Best video about calls and options out there by far

[@josemunguia4200]

You explained it better than my textbook. Thank you

[@dablaire89]

wooohhoooo I've been waiting for this type of video especially for weed stocks

[@news2hedz227]

Awesome thanks Mr. Bagel! Great explainer

[@yuliab.9338]

this is sooo good explained!! THanks sooo much!

[@InvestingBookSummaries]

Another great video, well done!

[@ThePlainBagel]

Thank you!

[@GabiN64]

For me to understand this I have sit down and write it out, substitute values and draw the graphs myself. Pause and play the video a few times as well.

[@dq4959]

I really like your videos, I take screenshots and keep in my phone as study materials. Thank you

[@BenTheSixTwo]

Thanks for explaining this. Now it's clear enough for me to know I have no clue what I'm doing

[@HattrickBateman]

I like that Metal Gear Solid sound effect snuck in there

[@TOC359]

Wouldn't it just be easier to play BLACKJACK ???

[@ThePlainBagel]

The way some people use options, probably! But if used in combination with stocks the can actually reduce the risk of your positions

[@user-ld4qt6ci7b]

@@ThePlainBagel Wanna play the Warren Buffet hedge fund bet?

[@EricSmyth4Christ]

If you count cards and play stocks poorly absolutely

[@anthonymullings8539]

@@EricSmyth4Christ dont they use multiple decks now to make it nearly impossible to count cards in real time?

[@EricSmyth4Christ]

@@anthonymullings8539 counting cards is actually way different than people think You only "count" the 2s-6s as +1 and tens and aces as -1 and ignore 7 8 9s Once the count is +1 to start the hand, the game is beatable using perfect basic strategy by %0.5 or so per hand. The bigger the bet the more money you make on average. Basic strategy reduces the house advantage to %2 as it is, but because the player gets special bonuses from blackjacks and splitting and doubling downs, you can make a lot more money as the player when there is a lot of tens in the remaining deck density. The bets a card counter makes is the table minimum, but when the deck is in his favor, he bets around the table maximum. When the houses made it 6 decks, now the game is only beatable at +6 count, since you have to divide the count by 6 to convert it to what it would be under 1 deck. This is called the true count conversion. Adding decks was definitely to make it harder, but because they deal through 5 decks, it's still common to get a true count of +1 or even as high as +5 sometimes The winning card counter these days makes about $150 an hour at high stakes, Vs about $500 - $700 back in the day The hard part is not getting kicked out with a nice win streak, not finding a beatable game in Vegas The house notices you betting big and also tiny, so they get scared and kick you out Because of this, some players use "cover" like acting drunk or not betting too big on smaller edges. This let's you last longer.

[@entropicallydriven]

Richard I found this explanation to be very clear- even more so than your more recent options post. I guess you can’t please everyone but the plots were a hit for me

[@Drsuds]

THANK YOU.... my head doesn't hurt anymore !

[@chrislopez218]

“ There’s no money here to steal, this is the stock market.” “ Really? Then why are you people here ? “

[@sixxwayy4240]

I'm 25 years Old. And listening to all of these is like reading Arabic. I'm clueless as hell. But I'm so excited to learn cos I know this can change my life

[@UtaShirokage]

Honestly I've understood like 40% of the video at best. This video is suitable mostly for people who already understand EVERYTHING but options.

[@akashsaini3387]

finally one good video i found on options. thankyou.

[@spastheghost]

I think I'm still too much of a beginner to understand this. See you all in a few months again

[@TheSamoanWatchman]

CONGRATULATIONS, You've managed explain options in the most confusing way possible. I used to know what options are, but then i saw your video.

[@spradv7031]

This is the best explanation in entire www !!!

[@carlitoes9473]

I like how you explain the benefit of exercising options as a hedging tool, it's a valuable thing to understand. Any vid on options will briefly explain the mechanics of how options work before hyping up the very risky art of speculating on options, where you buy tons of contracts and hope their values go up before expiration, where 100% losses can happen very easily if you bet the wrong way

[@micaonyx5301]

I'm I the only one who's head is spinning after listening to this.😭

[@Peter-ls8yr]

Put = Sell Short = Sell Call = Buy long = Buy

[@BS-qu5wy]

now, I'm more confused lol

[@bobbarker142]

It’s 2am I’m high af, but ngl this video helped a lot. I was confused by the whole concept of puts and calls but you really did a great job explaining it. I’d rather you “show off” than not give us all the information

[@jooky87]

Great video, I finally understand calls and puts

[@ThePlainBagel]

jooky87 glad you found it helpful!

[@emilybjorklund6290]

Were you an Econ major? So many graphs (; great tutorial! Thank you for sharing. Do you have an Instagram?

[@ThePlainBagel]

I was a finance major but I ran workshops in economics :) thanks for the kind words! Don’t have an Instagram account yet

[@dattani53]

You need 50 million subscribers atleast

[@ThePlainBagel]

T series got nothing on this

[@jimd335]

Very well made videos, this channel should take off

[@ThePlainBagel]

Thank you that's very kind!

[@MaxfieldAllison]

great production and very to the point.

[@mohammadrabbani4590]

Bruh I watched this 4 times and still don’t know what’s going on

[@Shining.Silver]

You're basically paying someone a little bit in advance for a contract to buy or sell a stock for a preset price before the contract expires. So for a $40 call, you would have the right to buy that stock from them for $40 no matter where the price goes during that time frame. If the price goes up to $100, you can use that contract to still buy it for $40. If the price crashes down to $0, you can just ignore the contract and only lose whatever premium you paid in the beginning It's an oversimplified explanation, but it's what I understood

[@obnoxiouscat6269]

@@Shining.Silver thank you bro

[@KrishabBashyal]

@@Shining.Silver Okay but how do you lose money in this situation. It seems like if you win, you win big. And if you're wont you only lose a little bit?

[@Shining.Silver]

@@KrishabBashyal the "better" the contract, the more premium you have to pay. If the real price is currently $40, you might be able to buy a $100 call expiring that week for only a few cents per share. The chances of it going up to 100 in such a short time is very low though. The closer or more "in the money" your call is and the longer the contract, the more expensive that premium is.

[@aaro3455]

boi this went over my head... and it doesnt help that I am not a native English speaker :D

[@ducktrapper483]

Dont worry, im a native english speaker and i dont understand either

[@pierre1562]

Useful tutorial, Thank you so much

[@carolinemamelpo9795]

Excellent explanation, thank you

[@bobross3880]

Oh hell yes. There’s literally no way this can go tits up.

[@dumbboi4783]

Nice, now I can finally join r/wallstreetbets

[@toxicfive8155]

Thank you for your videos. Can you explain the Option Pricing Factors in another video?

[@terakahn]

I've been obsessed with learning about options the past couple years and this video was excellent.

[@DTR89]

I feel like this guy is reading a script rather than explaining something he understands

[@ThePlainBagel]

That is half accurate! I do write the scripts myself though!

[@EricSmyth4Christ]

I need to trade stocks. If I can beat sports betting, I can beat the even less rigged free market

[@Kometheus]

This was SUPER GOOD!

[@durga8618]

wow nice explanation, i think it was very useful

[@lpeabody]

Melvin, please start watching @5:53 for a brief financial lesson.

[@MattSmith-vl8zp]

Dont worry they won't t learn. The government will bail them out and other hedge funds will try to help them out.

[@twounits]

Casinos are less rigged than options

[@ThePlainBagel]

If you buy or sell them? If you think one side is rigged, just do the other...

[@twounits]

I’ve done work for firms who hand options. I’ve also worked for firms who deal in spreads and cfd. I’ve seen them weigh their shekels against their overall customer customer positions. Lots of algos working out numerous investment stats. Like casinos, you don’t see many fail until their cronies turn on them. Red or black 50/50 ‘ish’. Markets? Played...

[@Itsjustme222]

I would be playing at the casinos before casually jumping into the derivitatives market.

[@odalismikaelle]

KZbin is the greatest tool thank you for this video

[@jeanc6294]

Thanks so much, make it so clear.

[@dan0_y]

ok now im ready to yolo gme

[@tillerphil4769]

"There is actually less risk. So by the way there is actually MORE risk." Me: yes mhm stonks

[@031TP]

This was a great video, can recommend a book that explain everything there to know about options, specially those different spread strategies. Thx

[@TranscendentalMental]

Nicely done, still dont understand the more complicated techniques but I have good understanding on long calls/puts and thats enough for me at the moment.

[@ThePlainBagel]

For most people understanding the basics is certainly sufficient, glad I could help!

[@crazy9932]

Stocks, legal gambling... no thx, ill keep my money

[@gu3sswh075]

You lost me after "Hello"

[@Jmasta7]

Super helpful video. All I needed to know why I shouldn't attempt options trading just yet!!

[@rorynortham3072]

"Filmed by: myself :(" 😂. Thanks so much for your stuff mate. Really learn a lot!

[@takeaseat6969]

So you're saying there's a chance.... That I could make infinity money. Nice. Nice.

[@user-ei7ed6zy9k]

It’s been 2 years since I heard of options trading and i still don’t understand it. I just take degenerate advice from wallstreetbets

[@notvenom1152]

This channel is the best!

[@Classick]

Thanks so much for making this. Keep up the great work.

[@ThePlainBagel]

Glad you find them useful!

[@AliasUndercover]

It's still gambling, and I'm terrible at gambling.

[@ahmedabduljabar6269]

What a great Video .. Thank you so much :)

[@easybeart]

Thank you for this video! I successfully turned $1000 into $50.

[@cmungus]

I now understand stock options and also why I have always loved plain bagels.

[@ExcelTutorials1]

Well said! I need to do an excel tutorial options at some point.

[@stevecorrell9325]

I like your video very much to explain it very well. And now I have a headache thinking about it. I'm glad I don't deal with options

[@fromsanfrancisco1]

Thank you for your video. I wish it was explained slowly even if not as much covered.

[@carlosescurra7819]

Great content! How about reselling options you already bought? For example, if you buy an out-of-the-money call of a stock which has a price of $3 for let's say a premium of $1.50, that expire in 3 years and with a strike price of $5. Because you are waiting a long time, in 1 year the stock is $9, which is above the strike price, and if you exercise the contract (paid a premium of $2 plus buying a share for $5, having invested $7 per share to sell them for $9 per share), you have little profit. But if you resell the option, which might be bought for a premium of $5, you have almost quadrupled your investment. What about this scenario?