Call Options for Beginners (2024)

Learn the absolute essentials of call options in this "zero to hero" crash course!

In this video, you will learn the basics of call options, how traders make money buying and selling them, why causes call option prices to change and see a real AMZN call option trade entry and exit demonstration using real brokerage software.

0:00 Intro
0:11 What is a Call Option?
1:16 How Do Call Buyers Make Money?
3:19 Why Do Call Option Prices Move with the Stock Price?
4:50 Intrinsic Value Explained
5:59 Expiration Breakeven Price Explained
6:51 Extrinsic Value Explained
9:57 Call Prices vs. Volatility Expectations
13:01 Call Prices vs. Time to Expiration
16:37 REAL Call Option Entry Demonstration (AMZN)
23:54 REAL Call Option Exit Demonstration (AMZN)
30:30 What Happens at Expiration?

What is a call option?

A call option is a financial contract that grants the buyer/owner the right, but not the obligation, to buy an asset at a fixed price between now and the option's expiration date.

How do call option buyers make money?

Call option buyers make money by purchasing call options and selling them at higher prices, which stems from an increase in the stock price and/or an increase in the expected volatility of the stock.

Why do call prices move with the stock price?

Since the call buyer can purchase shares of stock at a fixed price (the strike price), the value of that ability will grow as the stock price increases and fall as the stock price declines.

How do call prices change vs. volatility expectations?

If the market expects more volatility from a stock going forward, the market bids up the option prices since larger stock price movements can lead to higher option valuations than smaller stock price movements.

How do call prices change vs. time to expiration?

As time passes, a call's extrinsic value will decay toward zero as the option's expiration value becomes more certain. With lots of time to expiration, options will be expensive since there's lots of time for the stock price to make a big move and cause options to become more valuable. With less time to expiration, options will be cheaper since there's not much time left for the stock price to move and cause options to become more valuable.

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I hope this video helped! Please leave me video feedback and questions down below! :D

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Disclaimer: Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction, or investment. Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past performance is not necessarily indicative of future results. I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make.

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[projectfinance]

Huge project! I hope this video explanation helped you better understand how call options work.



-Chris

[AfinaGatita]

Out of all the videos I watched. You explained this the best 😄🤗thanks

[fishmut]

I'm so glad you mentioned that you can close out of your option before the expiration date happens, I have seen many videos and all talk about your option going to expiration and it going to zero, but none say you can take profits early should you go up and want to exit the option before expiry. I would feel absolutely sick watching a trade and couldn't get out of it till the end at expiry, so it's a valid question new people need to know, it's a real pity people don't explain things properly if their intent is to help others trade .

[mrdude]

Very clear and easy to follow. You're a very good teacher. Thanks for posting these!

[MHN]

Hey Chris, at your convenience, can you make more videos tailored to determining the best entry point for long-term short option sales? I really enjoyed your video on the VIX compared to other volatility indices and I would like to learn more on that topic including how best to lookup short, medium, and longterm volatility.

[corleoniee]

This video has made me understand call options in trading. Option trading is gradually getting popular in the crypto market and with the recent Lyra listing on MEXC global and their The Newport upgrade that allowed Lyra MMVs to partially collateralize short positions with cash which removes the need to swap to the base asset and instead using perpetuals to collateralize and delta hedge.

[HefTrade]

I know you work hard on making these videos, Chris! Although I understand and apply all these concepts, I am still interested in watching every video from start to finish. Great work as always. I regularly recommend your vids to newbie on reddit so I hope to see you get to 500K subs soon!

[patrickvonjanicke]

Tried this twice and lost money . Now with the market being way down it finally worked for me . I finally made money with an Apple Call Option on a horrible looking Friday 😅

[napalm]

This is such a good video for explaining things. You have a gift for teaching.

[SuperMassman]

Watching ALL your videos now, , 1, 2, 3 etc, , but don't know enough to take your course, YET. Will be taking it in the future

[ttrevino]

Thank you for sharing this. I need a new refresher summer brain drain with kids I guess😒 thank you for always updating your videos for beginners. Your top-notch.👍🏻

[melcapone]

Thanks. This has been my best example of option trading to date. Very detailed and easy to understand. Thanks again.

[philippwun]

Great video and lot of work in it as always!
I wanted to ask you if you could make a video on black-swan hedging via put-ratio-backspreads for someone who just selling CSP vs. credit spreads vs. teenies?
Something in that direction would be awesome!!

[devek]

you're so good at making me understand the process! Thank you

[kathleentonn-oliver]

Chris: I'm bewildered by your examples at 4:19 and at 5:30; your diagrams in both places are labeled "105 Call", but the 105 call is never mentioned in the discussion. How is the 105 Call involved with the trade? What am I missing?
[Next, at 6:01, the topic is labeled with "Prive" rather than "Price".]

[TyyGary-og]

Keep Teaching, I'll keep learning, Thanks.

[mindixit]

Thanks for detail explanation and keep repeating so I understand.

[AscendwithJaclyn]

This is incredibly helpful! Thank you for walking us through your real life long call as an example. 👍🏽

[mariocollado]

Thank you so much for this excellent video !! I'd like to see in a coming video and explanation about the Greeks. Thanks in advance.

[SweattB]

Hi Chris, Great video. I do have a question. How do you exercise your right to buy shares before the expiration date or can you?