Course 502: Introduction to Options
What Is an Option Contract?
In this course
1 Introduction
2 Call and Put Options on Stocks
3 What Is an Option Contract?
4 Understanding Option Pricing
5 Drivers of Option Value
6 Basic Option Strategy--Leaps
7 Another Strategy--Baby Puts
8 The Bottom Line

Options are traded in units called contracts. Each contract entitles the option buyer/owner to 100 shares of the underlying stock upon expiration. Thus, if you purchase seven call option contracts, you are acquiring the right to purchase 700 shares.

For every buyer of an option contract, there is a seller (also referred to as the writer of the option). In exchange for the cash received upon creating the option, the option writer gives up the right to buy or sell the underlying stock to someone else for the duration of the option. For instance, if the owner of a call option exercises his or her right to buy the stock at a particular price, the option writer must deliver the stock at that price.

Next: Understanding Option Pricing >>


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