Free options trading course for beginners
Start by opening a brokerage account, reading a stock chart, and learning the options chain. Then practice the same numbers in the live Strategy Builder before you ever click Buy or Sell. Educational only — not financial advice.
From brokerage account to first options order
These steps work at any options-approved broker. The pictures are one example layout only — buttons and menus will look different on your platform. The ideas (chart → chain → builder → order) do not belong to any firm.
This lesson is broker-neutral. JSM Options is not affiliated with Interactive Brokers or any other firm. You can study here with no account. To trade, open an account at whichever reputable broker you choose, get options approval, then follow the same sequence below. The screenshots use Netflix (NFLX) near $72 only so you can match numbers to a picture.
1. Open a brokerage account first
Pick any reputable broker that offers listed options. Beginners usually prefer platforms with low or zero stock commissions and transparent options contract fees, because a $0.65 fee on a $2.00 option is a large bite of the premium.
After the account is funded and options permission is on, you search a ticker the same way you would for a stock. That is where the first screenshot starts.
2. Read the stock chart before you touch options
Options are priced off the underlying stock. If you cannot read the chart and quote panel, the chain will look like random numbers. Every broker shows the same core data: last price, change, open/high/low/close, volume, and a candlestick (or bar/line) chart. In the example screenshot, NFLX is selected in a watchlist and the main pane is a 4-hour candlestick chart.
Also glance at the news card: the stock is down from a 52-week high of $124.86, so many strikes on the chain will be far from today’s price. That matters when you choose expiration and strike next.
When you have a directional view — or a “I think it stays near $72” view — leave the stock order ticket alone. Open your broker’s Options or Option Chain view instead. That menu may be a tab, a right-click on the symbol, or a Trade → Options screen. The name changes; the destination does not.
3. Switch from the chart to the options chain
Look for a control labeled Options, Option Chain, Calls/Puts, or similar. In the example window the tabs read Charts · Options · News · Fundamentals — that is only one firm’s layout. Stay on the chain itself (skip “wizard” or “strategy builder” tools inside the broker until you can read a raw chain).
Select the stock
Confirm the header still shows the same ticker and last price (here NFLX 72.00, −1.85%). The chain is always for one underlying at a time at every broker.
Pick an expiration
Every listed expiry appears as a date row or dropdown. Some platforms mark weeklies with a W. In the example, NOV 20 ’26 · 59 Days is selected. Shorter dates move faster and decay faster; longer dates cost more premium. That relationship is the same everywhere.
Set the view
Narrow the table to a handful of strikes around the stock price (the example uses 10 strikes). Optional filters — weeklies, routing, call/put only — are convenience settings. You only need: expiry, strike list, calls, puts, bid, and ask.
4. How to read every column on the chain
An option chain is just a price list of contracts that share the same underlying and expiration. Each row is one strike. Each side is a call or a put on that strike.
| Column | What it means | From this screenshot |
|---|---|---|
| Strike | The price locked into the contract. Rows near the stock price are at-the-money (ATM). | Spot ≈ 72. The 72.5 row is the closest ATM strike. 55–70 are in-the-money calls / out-of-the-money puts. 75–82.5 are the opposite. |
| Bid | Highest price a buyer is currently bidding. If you sell the option, this is the realistic credit you can lift now. | 72.5 call bid 4.60. 72.5 put bid 4.60. |
| Ask | Lowest price a seller is offering. If you buy the option, this is what you typically pay (or you work a limit between bid and ask). | 72.5 call ask 4.70. 72.5 put ask 4.70. |
| Last | Most recent print. Useful context, not a guaranteed next fill — the live market is bid/ask. | 72.5 call last 4.65. Deep 55-strike call last shows C19.02 (a closing print style). |
| Delta | How much the option price tends to move if the stock moves $1. Also a rough “chance it expires in the money” for beginners. | 72.5 call delta 0.532 (about a coin-flip ATM call). 72.5 put delta −0.474. Puts have negative delta because they gain when the stock falls. |
| Gamma | How fast delta itself changes as the stock moves. Highest near ATM. | 72.5 call gamma 0.03451 — the peak area of the table. |
| IV | Implied volatility of this expiry, shown in the center header. Higher IV = richer premiums and wider expected ranges. | IV 40.1% for the Nov ’26 expiration on this shot. |
Stock 72.00. Strike 72.50. Bid 4.60 / Ask 4.70 / Last 4.65 / Delta 0.532.
To buy one contract you plan on paying about $4.70 × 100 = $470 (plus fees). That is the most you can lose as a buyer if you hold to expiry and it finishes worthless.
To sell that same call you would take in about $4.60 × 100 = $460, but selling naked calls is an advanced, high-risk permission — do not start there.
In-, at-, and out-of-the-money
With NFLX at $72: a 65 call is in-the-money (you could buy stock cheaper than the market). A 72.5 call is at-the-money. An 80 call is out-of-the-money and cheaper (bid 2.06 / ask 2.09) because the stock must rally for it to be worth exercising.
The bid/ask spread is a cost
On the 72.5 line the spread is $0.10. That is $10 per contract if you buy the ask and immediately sell the bid. Tight spreads (a few cents) are easier for beginners than wide penny-stock option spreads.
Notice the 72.5 call and 72.5 put cost almost the same here (both ~$4.65). That is common near ATM when rates and dividends are not dominating: put-call parity keeps the two sides related. You do not need the formula yet — just know both sides of the same strike are two different bets, not two copies of the same trade.
5. Visualize the trade in the Strategy Builder before you order
The chain tells you price. It does not show you the profit and loss shape. Copy the numbers into the free builder first so you can see max gain, max loss, and breakeven on a graph.
Ticker: NFLX · Type: Call · Side: Long (you are buying) · Strike: 72.5 · DTE: 59 · Premium: 4.70 (use the ask when you model a buy; use the bid when you model a sell).
One contract = 100 shares, so the builder treats $4.70 as $470 of debit. Add a second leg if you are studying a spread. Compare strategy A vs B if you want two ideas on one graph.
Use the graph to answer three beginner questions: Where do I lose the whole premium? Where do I break even? Does a $5 stock move help or hurt this position? If the picture is unclear, do not send the order yet — change strike or expiration in the builder until the risk is obvious.
6. Place the order back on the options chain
When the builder payoff is the trade you actually want, return to the broker chain. You do not type a stock order. You click the option you modeled.
Click the bid or the ask on the correct row
Buying? Click the Ask of the call or put you modeled (or the Bid if you intend to join the bid with a limit). Selling? Click the Bid. The order ticket should show NFLX, call/put, strike 72.5, and Nov 20 2026 — verify every field.
Choose Buy or Sell, then a limit price
Do not use the stock Buy/Sell buttons unless the ticket clearly lists the option contract (call or put, strike, expiry). Clicking the chain row is the usual way to attach the right contract. Prefer a limit between bid and ask rather than a market order while you learn. Quantity 1 = one contract = 100 shares of exposure at every standard U.S. broker.
Read the ticket before you transmit
Confirm: action (BUY TO OPEN or SELL TO OPEN), expiry, strike, right (C or P), limit price, estimated debit/credit × 100, and commission. On a long call or long put, max loss is the debit you pay. On short or multi-leg tickets, max loss can be much larger — stop if the ticket does not match what the builder showed.
Transmit, then watch fills
A fill at 4.65 on that 72.5 call means you paid $465 plus fees. The position then lives in your options portfolio, not as 100 NFLX shares, unless it is later exercised or assigned. You can close it any day before expiration by selling (if long) or buying back (if short) the same contract.
Fund a low-fee account → get margin + options approval → read the stock chart and quote → open the Options chain → pick expiry and strike → copy strike / DTE / bid-ask into the Strategy Builder → only then click the chain to buy or sell. The builder is practice. The chain is live money.
Educational walkthrough only — not financial advice and not a recommendation of any broker, stock, or option. Screenshots are one frozen example window so the numbers are visible; they are not a required platform and will not match live prices. Column names, colors, and menu paths differ by firm. Bid, ask, strike, expiration, and the 100-share multiplier are the same idea everywhere. Options can expire worthless. Naked short options can lose more than the credit received. Approval levels and margin rules differ by firm and country.
What Is an Option?
The first lesson every options beginner should read.
If you're completely new to options trading, the first thing to understand is what an option actually is.
An option is not a stock. You are not buying or selling shares when you trade an option. Instead, you are trading a financial contract that gives one person certain rights and another person certain obligations.
That may sound complicated at first, but the basic idea is surprisingly simple. Every option has a few important characteristics. Once you understand them, reading an options chain and learning strategies such as Covered Calls and Cash-Secured Puts becomes much easier.
The 6 Things You Need to Know About Every Option
- It is a contract
- There are two sides to the contract
- The buyer receives a right
- The option has a strike price
- The option has an expiration date
- The option has a premium (price)
Don't worry about memorizing these. The goal is to understand what they mean.
1. An Option Is a Contract
An option is a financial contract. When you buy shares of a company, you actually own part of that company. When you buy an option, you don't own the stock. Instead, you own a contract that gives you specific rights involving the stock.
For example, an option might give you the right to buy shares of Apple at a certain price before a certain date. The stock is called the underlying asset.
Stock → the underlying asset
Option → a contract whose value is connected to that asset
2. Every Option Has Two Sides
An option contract always has two sides: the buyer and the seller. The buyer pays money to obtain the option. The seller receives that money and takes on an obligation.
This is important because an options trade isn't simply you "trading against the market." There is another side to the contract.
3. The Buyer Gets a Right — Not an Obligation
This is one of the most important concepts for beginners.
When you buy an option, you receive a right. You are not automatically required to buy or sell the stock.
Call Option
A call gives the buyer the right to buy the underlying stock at the strike price.
Put Option
A put gives the buyer the right to sell the underlying stock at the strike price.
The seller of the option is in a different position. The seller receives the premium and takes on an obligation if the buyer exercises the option.
4. Every Option Has a Strike Price
The strike price is the price specified in the option contract. Think of it as the price at which the option allows the underlying stock to be bought or sold, according to the contract.
For example, suppose Apple is trading at $240. You could purchase a call option with a $250 strike price. That contract could give you the right to buy Apple shares at $250, subject to the contract terms.
Call → right to BUY at the strike price
Put → right to SELL at the strike price
5. Every Option Has an Expiration Date
Options don't last forever. Every option has an expiration date, which tells you when the contract ends.
An option might expire in two days, 30 days, six months, or even two years. Once it reaches expiration, the contract is no longer an active option.
This is very different from owning a stock. Shares normally don't have an expiration date. An option does.
Why does this matter? Time is an important part of an option's value. An option with months remaining generally has more time for something to happen than an otherwise similar option expiring tomorrow. Later, you'll learn about time decay and the Greek Theta.
6. Every Option Has a Premium
The premium is the price of the option. It is what the buyer pays the seller for the rights provided by the contract.
Suppose an Apple option has a premium of $15. There is one important detail: options are normally quoted per share, but one standard options contract generally represents 100 shares.
$15 premium × 100 shares = $1,500 for one standard contract, before commissions and fees.
So you are not paying $1,500 to buy Apple shares. You are paying $1,500 for the rights provided by the option contract.
Putting Everything Together
Suppose Apple is trading at $240. You find a call option with:
- Underlying: Apple
- Type: Call
- Strike price: $250
- Expiration: 30 days from now
- Premium: $15
This means you would be buying a contract that gives you the right to buy Apple at $250, according to the contract terms, until its expiration.
The premium is $15 per share. With a standard 100-share contract, that is $1,500.
Calls and Puts: The Quick Version
| Call | Put | |
|---|---|---|
| Buyer gets the right to | Buy | Sell |
| Strike price | Agreed price to buy | Agreed price to sell |
| Buyer pays | Premium | Premium |
| Seller receives | Premium | Premium |
A useful beginner shortcut is Call = right to buy and Put = right to sell. Remember that this describes the option buyer; selling an option creates a different position and obligation.
The 6 Characteristics at a Glance
Options are contracts. Every contract has a buyer and a seller. The buyer receives rights, while the seller takes on obligations. Every option has a strike price, an expiration date, and a premium.
Once these concepts become familiar, the numbers you see in an options chain will start making much more sense. Next, we'll look at how these characteristics appear in a brokerage account and how to read an options chain.
Educational only — not financial advice. Options involve risk and can result in losses. Examples are simplified and do not account for every real-world factor.
Beginner FAQ
The questions almost every new options trader asks first. Click any question to open the answer.
Why do options exist at all?
Options aren't just for speculation. In real markets, traders and investors use them to:
- Hedge — e.g. buying a put as insurance on shares you already own.
- Generate income — e.g. selling a call against stock you own (a covered call), which you'll meet in Fundamentals.
- Speculate with defined risk — a long call or put risks only the premium you paid, unlike buying shares on margin.
None of these uses require risking your whole account. Size small while you learn.
What's the difference between a "right" and an "obligation"?
This is the single most important distinction in options. The buyer pays a premium and receives a right — the choice, but never the requirement, to buy (call) or sell (put) the underlying at the strike price. If the trade doesn't work out, the buyer can simply let the option expire and walk away, losing only the premium paid.
The seller (also called the "writer") receives that premium up front and takes on an obligation instead. If the buyer chooses to exercise, the seller must honor the contract — deliver the shares (call) or buy them (put) — whether or not it's convenient. Sellers don't get to change their mind once assigned.
Who is actually on the other side of my trade?
It's a common beginner assumption that the underlying company is somehow involved — it isn't. Every option has exactly two parties: a buyer and a seller. When you buy a call or put, another trader or market maker is selling it to you, and vice versa.
The exchange and the Options Clearing Corporation (OCC) sit in the middle to guarantee both sides perform, but the actual obligation always rests with whichever trader is short (sold) the contract — never with the company whose stock underlies it.
What happens when an option reaches its expiration date?
One of three things, depending on where the stock ends up relative to the strike:
- Out-of-the-money: the option simply expires worthless. The buyer loses the premium paid; no further action is needed.
- In-the-money: most brokers automatically exercise it on the buyer's behalf, converting the contract into a stock position (100 shares per contract).
- Closed early: the buyer can sell the option before expiration to capture its remaining value instead of exercising it.
Sellers who are assigned must deliver (call) or purchase (put) the underlying shares at the strike price.
Do I have to hold an option until it expires?
No — this is another common misconception. Most options are actively traded and can be bought or sold to close a position at any time before expiration, at the option's current market price. Many traders close well before expiration specifically to avoid assignment risk or last-minute volatility.
What's the most I can lose as an option buyer?
As a buyer, your maximum loss is limited to the premium you paid, plus any commissions — nothing more, even if the stock moves dramatically against you. This defined, known-in-advance downside is one reason buying calls and puts is often taught before selling them.
Is selling (writing) options riskier than buying them?
It depends on the strategy. Selling a "naked" call — one not backed by owning the underlying shares — carries theoretically unlimited risk, since a stock price has no upper limit. Selling a covered call (against shares you already own) or a cash-secured put (backed by enough cash to buy the shares) defines and limits that risk considerably.
This is why beginners are typically taught covered strategies — like the Covered Call and Cash-Secured Put — well before naked, undefined-risk positions.
Do I need 100 shares or a lot of money to get started?
Not to buy a call or put. One contract typically controls 100 shares, but as a buyer you only pay the premium — for example, a $15 premium × 100 shares = $1,500, usually far less than buying 100 shares outright. Covered strategies, like a covered call, do require owning (or buying) those 100 shares first, which needs more capital.
Is options trading just gambling?
Options are a tool, not a strategy in themselves — how they're used determines the risk. Buying far out-of-the-money calls with money you can't afford to lose is closer to gambling. Using options to hedge a stock position, generate income against shares you already own, or speculate with a small, clearly defined amount of risk is closer to disciplined trading. The instrument is neutral; position sizing and strategy selection make the difference.
Test Your Knowledge
Six beginner questions covering what you just read. No account needed.
Educational only — not financial advice. Options involve risk and can result in losses. Examples are simplified and do not account for every real-world factor.