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9. Options Basics
Calls, Puts, Strike prices, and Expirations. The gateway to leverage.
The Power of Leverage
Options are contracts that give you the right (but not obligation) to buy or sell 100 shares of a stock at a specific price by a specific date.
- Call Option: The right to BUY shares at the "strike price". You buy Calls when you are Bullish.
- Put Option: The right to SELL shares at the "strike price". You buy Puts when you are Bearish.
- Expiration Date (DTE): Options decay in value as they approach expiration. Time is your enemy when you buy options.
- Out of the Money (OTM): A Call is OTM if the strike price is wildly above the current stock price. These are cheap but highly risky like lottery tickets.