Trading · 66 / 86 · 2 min
Options
A call is the right to buy at a strike. A put is the right to sell at a strike. Both expire. This is what they are. It is not a book of trades.
A call is the right to buy at a strike. A put is the right to sell at a strike. Both expire. This is the shape of the contract, not a trade.
A worked case
Someone buys a call because they are sure. The price stays below the strike until expiry. The premium is gone. The certainty was not in the contract. The expiry was.
What you pay
The buyer pays a premium upfront. That premium can go to zero at expiry. The seller collects the premium and can face a much larger loss.
Expiry
After the date, the right is gone. A screen that shows a large gain before expiry is not cash until you can close or exercise, and closing has its own spread.
TXKN will not tell you which option to buy. If you cannot explain the premium and the date in a sentence, do not touch it.
The premium was the whole trade
A call is the right to buy at a strike before a date. A put is the right to sell. You pay a premium. If the price never crosses the strike in your favour, the right expires and the premium stays with the seller. That is the contract. Crypto options venues and, later, ETFs wrapped the same shape. People buy calls because they are sure, and then learn that sure and before this date are different sentences.
This course will not give you a book of trades. The picture on the page is only the shape: below the strike, a call is worth about nothing, and you have already spent the premium. Above the strike, the right has value, and you can still have paid more for it than that value.
Read the strike, the expiry, and the premium in dollars. If you cannot say those three, you do not hold an option. You hold a feeling.
Read it yourself
These links are the record. They are not a recommendation, and they are not instructions. A news story or a court paper can still be wrong about a detail. The check does not change because a famous name is in the story.
Apply the check
Open a question. The line is about this topic. It is not a verdict that anything is safe.
The seller of the option, who keeps the premium if it expires worthless.
The contract: the strike, the expiry, and who can exercise.
Expiry. After that the right is gone.
Check yourself
Does an option that is up on the screen mean you have that cash?
Not until you close or exercise, and the spread still applies.
After this you can state the premium, the strike, and the expiry in one sentence, or leave it alone.