Call Options Explained for Beginners

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Call options are one of the two primary option types, with put options being the other.

In this video, I explain the basics of call options in great detail, covering:

0:00 - Introduction
0:47 - What is a Call Option?
2:10 - The Option Contract Multiplier
3:35 - How a Call Option's Value is Determined
5:20 - A Call Option's "Intrinsic Value"
6:25 - How Call Buyers Make Money
10:03 - How Call Buyers Lose Money
15:00 - What is Extrinsic Value?
16:35 - Call Option Trade Examples Visualized
24:00 - Buying a Call on tastyworks (Trade Demonstration)
33:35 - What is Shorting a Call Option?
34:22 - Short Call Trade Examples Visualized
39:40 - Shorting a Call on tastyworks (Trade Demonstration)

I realize I did not talk about exercising call options in this video, and that's because options are rarely exercised due to the loss of extrinsic value when exercising an option.

Instead, options traders buy/sell options with the intent of profiting from the price changes of the option contracts, and have no intention of ever exercising the options to convert them into shares.

Be sure to leave a comment down below with any questions you may have!

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[projectfinance]

Another long one... but think of it as a lecture for a class you're taking. I hope you get a lot out of the details I share in this video and the numerous trade examples I go through. Also, I hope the practical tips I provide related to entering/exiting trades is helpful. Please let me know what you think, and if you enjoy these long-form videos!

-Chris

[Rachel-lbdh]

You should be a college professor. The way you explain & give examples makes it 10x easier to understand. And even though it's really annoying how you continually state a term, followed by it's meaning - it's a great way to help someone internalize the new vocabulary & it's meaning. So, thank you for your videos, they're the best I've seen on YouTube!

[zenflowmaster]

The second one I've watched. Nothing new here for my understanding but very competently reinforced and my understanding is consolidated. I like Chris's measured, precise and clear delivery.

[mertyasar]

actually people are selling these type of education videos for high prices, but this guy is doing this free for all of us.
I am really lucky to meet you man, you are simply awesome. Thank you one more time !

[lanlert]

Hey, just want to say that I appreciate this channel a ton! Did pretty well on the final for my very first Finance class and would not be able to make it without these great videos on projectoption. Thank you.

[mikedok]

Love the video. This is the second video completed with notes. The first was the almost 3 hrs Option trading for beginners. The journey continues. Have a happy new year, Chris.

[geraldinewilner]

Chris, I like listening to the cadence of your voice. I find you easy to listen to and learn from. As a newbie trying to take in so much information, when I have had a limit for the day, and my head begins to nod. I stop, take a nap, and come back:)

[luisgonzalez]

Great Job & Presentation, I was able to follow along and understand with out a problem. Thank you

[jaybedreamin]

Hey Chris! Great channel. I recently discovered options trading and have been binging your content ever since, for hours a day. I have a question about selling options tho

Let's say I sell a call option where I collect a premium upfront, but the option increases in value. The person who bought the option from me then decides to sell the option to collect their profit, who does the option get sold to? Am I forced to buy it back at a loss? Does it get sold to someone else, and I get to keep the premium I collected in the beginning?

[williamblaket]

Hit after hit! I’m so glad your YouTube exist! 🙏🏾

[luckycui]

Very good demonstration on buying Call option and close it. Really good for beginner. Thanks a lot. Just have a question, after buying a Call option, when I chose to Close Position, do I have to wait for somebody to buy it (like the stock)?

[pdiez]

Thanks so much for the content! I'm not even in university and thanks to these videos I'm starting to understand more about how options work! 🙌 Which books do you recommend to learn more in depth about Options and Derivative Trading?

[c.brunelle]

You're really good at what you do! Thank you for being thorough and for explaining the basics in detail for beginners like myself.

[ksmith]

Omg. You're a great teacher!!! Thanks so much for this. Im new to trading stocks and options and this is very helpful. 🤗

[Winsome]

Just watched your presentation and wow!! Great job. I never paid attention to option trading and decided to try and educate myself this morning...glad I found you. Excellent teaching job. You were clear, prepared and explained it so well that I even understood! Thank you so much!

[moeamleh]

Great video, thank you for the detailed explanation!
Quick question tho!
When selling a call option without owning the stock, the leverage is there to ensure you have enough money to exercise the deal at the strike price once the option expires?

[markologan]

when you buy a call, when do you start making money, on the strike price or on the break even price

[Botanica_Gaming]

I had to check the comments section to say you made an even BETTER video. The production value in the video is outstanding!

[sra]

36:00 when your selling calls, it’s best to buy in at the lowest price. So in this example the price didn’t really move and the option expired worthless. Would you need to do the actual buying or would it be done by itself?

[farisqureshi]

One of the best video on youtube. I have been searching dozens but this on ehas cleared all of my basic concepts about options.