Options Trading 101 For Stock Beginners (Robinhood)

it's the options for me [Music] hey what's up youtube this is foxtel digital coming to you again with black girl stocks and in this video we are going to be talking about options so this is the video that you guys have literally been waiting for like for a like you telling me you're waiting for it and then you putting like these little side eye emojis and stuff this is how to start trading options okay so i'm actually going to do this video on two different parts and in the first part i just want to get a basic understanding of what options are and how you can get started with doing them and then in the second part i really want to physically show you how to get started on your phone so this we can do on our phone i love to do it on the phone that sounds weird and just go over what you're gonna see and what to look out for this is the basics of options trading but first if this is your first time watching this video please make sure you click that thumbs up button it really helps the channel i really yeah go ahead click the thumbs up button also make sure that you subscribe and click that notification bell so that you get notified any time i upload a new video for you guys so option trading may seem a little bit overwhelming at first but it's easy to understand if you know a few key points so we are going to go over definitions key facts tips tricks flips all that stuff really to get you beginning because i promise you it's really it's the options for me i mean you can get an option and you'll just see so much return so fast versus just buying stock literally when you buy a stock if it goes up one dollar then you know you get one dollar great but with options if the stock price goes up one dollar you stand to gain a lot more i mean this percentages on that percentages and just it's it's a really nice return so let's get started part one what are options okay so what is an option an option is a contract that gives you the right but not the obligation to buy or sell any stock that we're talking about so to buy or sell a stock at a specific price price it's the strike price right uh the strike price so uh you threw me off so it gives you the right but not the obligation to buy or sell 100 shares of a stock at a strike price on or before a certain date expiration date right the expiration date so you have to buy or sell it on or before the expiration date for a fee it's the premium premium you have to pay a premium every time you buy an option contract so basically your premium is you paying for this amazing deal that you were gonna get because i'm telling you buying options is so amazing although options are amazing there are risks that come with options so i really just want to put this out there first but there's a warning that they put and you know options involve risk and are not suitable for everyone options trading can be speculative in nature and carry substantial risk of loss let's go before i give you any definitions i just want to give you a little example of why buying options or buying option contracts versus just outright buying stock shares is so lucrative let's just use this as an example let's say you have three hundred dollars to invest in stock xyz and then assume that that stock xyz is trading for one hundred per share and you're betting bullish over a short term basically meaning that you feel like the stock is going to increase in price in a short amount of time let's say 30 days so in 30 days you feel like the stock is going to go up okay and you have enough money to buy three shares because it's it's going for 100 per share and you have 300 so you're just throwing it all in there honey you don't care about you just i don't care if i lose at all sometimes you gotta go balls deep sometimes you gotta go all in but on the flip side so that's how much we can put as far as actually buying the shares but then on the flip side let's go over here to the options portion of it and let's say that okay there's one option contract with a expiration date that's a month away so it's a one month expiration or 30 day expiration and it's a option contract with a strike price of one hundred and ten dollars and the premium costs three dollars per share okay so your premium is three dollars and buying one option contract is gonna also to buying one of these option contract calls why am i saying contract we're buying a call so betting it going up that's the option call so this is a this is an example of a an option contract call an option call so buying one xyz contract is gonna cost 300 because the premium price is three dollars per share for getting this deal but that's over 100 shares at the start at the strike price of 110 so that's going to cost you 300 actually buying three shares of the entire underlying stock for 300 or you can buy one option contract for 300 that's betting that the stock is going to go up in a month which it probably is because we're gonna pick a good stock like you already know so let's fast forward 30 days so before this contract actually actually expired because we never want to wait for the option to expire you don't want to do that unless you're writing the option or selling it that's a whole another thing just we're going to talk about writing options or writing or they call it writing or selling because you can buy or sell so right now we're just talking about buying options but before this option actually expires that that stock price jumped to 150 per share and so now the premium for that same contract that you have is worth eight dollars so it jumped from three dollars to eight dollars per share but you only paid three dollars per share so times a hundred you see where we're going here right xyz is now 100 per share and so let's go with the option of you buying the three shares and the stock price increased to 150 percent per share so theoretically if that stock price jump up to 150 dollars per share that means there's a 50 per 50 profit per share that you purchase you purchase three so that's a total of 150 profit okay or basically a 50 return i mean it's okay so for 300 you get 150 dollars back that's cool great but now let's go to the other side and let's say we actually bought an option contract instead of just buying the stock shares instead of that three we're gonna buy one contract that gives us power over a hundred okay and so the purchase of that 150 call option contract with that you're gonna have a profit of 800 okay because now that premium is eight dollars so you're going to multiply that eight times the one contract that you have times the 100 shares and so that's basically 800 800 profit but then you do have to pay for that premium so they're going to take that out and so you just subtract that 300 but that still gives you a profit of 500 for that same 300 that you put in you got back 500 that's basically a 266.7 increase for the same amount of money that you put into that option you got so much more money like a lot more money so that's basically the glamorous part of buying options is that huge leverage that percent increase is insane versus that little dinky you know 150 dollars honey no no if you really want to start flipping some coins options are where it is but like i said vice versa you know the same thing could happen if you were wrong but when you're actually just buying calls and puts the only thing that you stand to lose is your premium or that that premium price that three like in this example that three dollars or the price that you pay per share to have this amazing contract you know because when you have contracts sometimes you have to pay for this good deal that we're getting like it's kind of like buy one get one half off like it's not all it's not half off up front you're gonna have to put a little you have to put a little cute piece up before you get into the club and so that's what the premium is but that's what that is but let's go ahead and let's get into some definitions and stuff i know i'm throwing all these strike prices and words around you probably like what is that um let's just get into some key definitions okay so first with options there's two different type of options that that you can get so there's a call and then there's a put and so basically a call option is you feeling that the stock is going to increase in price you want to put a call option in and on the opposite side a put is you feeling that the stock is going to go down so you feel like it's going to go down so you'll get paid and you'll make profit when the stock actually goes down a completely different reason why options are really lucrative because anytime you're buying stocks actual stock honey if the stock is going down honey my profits are going down i'm not making it i'm not making it but with options you have different options to have strategies to make money even when the stock price is going down it's absolutely insane and so lucrative that's why everybody loves options that's probably why y'all have been begging for these for these videos how do we about to start getting into our options because honestly a lot of my profits come from options it's easy money you know you have to be careful with them too because they can mess your account up honey you can wipe it out honey like wipe out okay so for the call just think about when you're at an auction and people are calling out their price that they want to bid for something they want so they're calling for it right now [Music] yeah storage wars yeah and all that bidding and stuff so that's a call yeah so when you're wanting to call you're calling for that strike price so that's that price you want to get this honestly it sounds like a whole little option all this options and stuff is just like the auction honey i feel like i'm in storage wars right now but then think about puts like this so when you're buying a put think about it as if you have the privilege to put this item on sale okay so i can put it on sale because i have that privilege i have that right i own it it's it's a form of ownership but keep in mind when you're actually buying a call or put then you do not have an obligation to buy or sell that stock you don't have to but on the opposite side when you're selling a call or put you are obligated to to give that buyer all that 100 shares if they actually wanted to exercise it but i mean unless you just have that money like let's say if the if the strike price is uh what do we have here a hundred and ten dollars as far as selling calls and puts unless you have that eleven thousand dollars to you know buy the stuff buy the shares at that price so you can sell them to to that buyer then that's on you but i don't have eleven thousand dollars in my account and i don't yeah so most times a lot of times especially for beginners if your portfolio isn't you know big boss like that then you can buy and sell these contracts before the expiration date and you can gain that profit you know just minus the premium price so i mean that's that so calls and put that you can buy and sell but right now we just want to focus on buying because the only thing that you stand to lose when you're buying calls and puts are your premium but on the opposite if you're selling like i said that means that you're obligated to buy all those shares if that person you know wants to actually exercise that contract but you know if the stock still is going down and it expires worthless then you gain however much it went down i mean i'm not going to talk about selling because i don't i don't really do that myself it's very risky and i wouldn't advise any beginners to do that because you can really really get yourself into some mess that you don't want to be in so just focus on buying calls and puts right now that's that's where it's a little bit safe the water is a little it's a little shaky over there too but it's not as bad as over there with the selling child don't miss yet what is the strike price strike price is the value that you see the stock having at or before the time of the expiration date so you expect the stock to go up to that price the strike price so just think about it as it's going up to that strike price and when it strikes we win wow that is nice i never thought about it like that see you helping me out helping you is helping me too me too anyways strike price is the price that you bet the stock going to by this expiration date it's so easy now and then the premium this just like you think of premium prime prime ribs this is premium honey you're gonna have to pay to get into this club because this is a lot of money you saw that difference between that 100 little trash 150 versus this 800 or 500 after they paid the premium but it's a huge huge profit margin it's really cute so yeah that's the strike price and then expiration date is like i said that date that that contract cannot go past so the farther the strike price is from the actual price when you buy the option then it's usually going to be it's going to have a lower premium if it's farther away that means you're going to be out of the money oh i got it should i get into that different stocks have different expiration dates a lot of the larger stocks like tesla apple you know things like that they have more frequent expiration so they may have weeklies monthlies yearlies and stuff like that because you know they have faster rewards and the things going up and down honey is huge and there's so much volume but then on the other on the other side they have other stocks that just have maybe weeklies or some only have monthly so but don't let it don't let it expire worthless the only time you ever want it to expire worthless is if you're selling calls and puts but we're not talking about that like i said we're only talking about buying them okay and when you're buying it you do not want to expire because that basically means you just threw your premium away and we don't have money to throw away hey so i think you have a pretty basic understanding of what options are you know that there's two types calls and puts calls going up puts going down i'm going down that's a put um i think you guys are ready for the second part of the video and so that's actually going to be jumping in to robin hood honey so we can see what you know these options are talking about the stock that i'm going to use is nio and so nioh it's a company in china it engages in the design manufacturer and sell of electronic vehicles so essentially it's a competitor of tesla this is nice the company provides users with home charging and power express valet service why i like neo and io whoever and so basically what you're going to do is you're going to click on this trade and this is going to flip up press trade options so here this is a pretty you know basic rundown of what all can happen to the stock do you think it's going to go up do you think it's gonna go down do you think it could go up or down you don't know or do you think it's pretty much gonna stay the same because you know there's some stock that they just don't move it's just looking just real grandma just [Music] i think that obviously we see on the five year trend you know five year trend think trend always find trend and we all you know you want to find your majority of the trend on the five year marks or the year mark you know you want to start from far away and look up here you see up here at the top all of these different dates these are different expiration dates so they have expiration dates you know a couple of days away september 25th because this is the 17th they have one october 2nd all the way up till january 20th of 2023 so that is a long time away of course it's gonna go up so let's get into it i'm gonna press on october 2nd and so once you select your expiration date you see this list right here okay so you see this list and you see i mean it can go it can go forever honestly not forever but i guess they have a little stop but okay so you see this right here the share price in the middle so that is what the market price is right now that's how much this stock is per share right now 19 and 30 cents and it really went up because i actually have a contract and i mean it's making me some coins so i'm appreciating it thank you so much keep going up honey because tesla she's she wasn't doing nothing today she wasn't talking about much at all so a few things you see this right here uh this 19. let's just do the one right underneath it because this one is going to be very profitable well it's going to be profitable for a lower price so this right here that you see where it says 19 call that is the strike price so this price right here this is the price that you see the stock having that value at the time it expires so by october the second i believe that this stock is going to be 19 and up because i'm buying a call i'm expecting it to go up but the further this strike price is away from the actual share price the more profit that you stand to get that's why they cost more money because i mean obviously if the stock is 19 right now but i have a 17 call i mean i'm just gonna get a lot more money so that's why it's more expensive this right here this is the strike price and you see this right underneath it it says break even at 20.75 so once the stock gets to 20.75 essentially you would have broken even so that price that we paid the premium price that profit will so that basically means that you've made your premium back so we broke even and so to break even that would mean that the stock would need to increase by 7.40 and this over here to your right the far right in in the in the little box that is your premium price per share though so to buy this contract per share you would have to pay 1.75 so you're going to that's per share and one contract gives you the right to buy or sell 100 shares so just multiply that 1.75 by 100 if you want one contract and it'll cost you 175 or if you wanted five contracts it would be 875 but we would just say one okay um so that's that's just basically that and then on the flip you can click up here and that's going to sell it oh no no no we don't want to do that yet hold on you want to make sure you're on buy okay and then i really want to make sure you guys please make sure when you're buying options or doing anything with options make sure you have the right expiration date because i literally just did that yesterday i bought it at a terrible strike price you really just have to pay attention because you can mess yourself up so just make sure you buy it at the right strike price because the strike price i did yesterday was way too high honey in a month away i said girl that stock isn't going up that much so i made sure i sold that today okay so we're on the call then you click over here to the put and you see how it changed colors that basically means the color change the ones that are green means that that portion or that call like the call option those were in the green those made profit at this time at the end of the day because the stock market is closed right now like i just got up work but then if you click put you see it's red well i mean nio is going up it's really going up and so that's why the put side they're red because you know they're mad they didn't do anything today you can click over here to selling it you know we don't want to look at that the prices are about the same too okay so i mean that's what's up buying or selling the prices seem to be about the same but it's just you know you gotta make sure you write it tells you the chance of profit 71 what's up let's go ahead and let's just click on the 19 call and then this screen is going to pop up right here and i really want to say this right now the overall value of your option contract it's not based solely on the actual stock price so that's just one factor of what goes into option value so for example let's say the stock price goes up okay let's say it expires tomorrow so you waited a little bit for the expiration date and the stock price goes up a couple of dollars and you would expect you know a lot more profit but it you know your option value only goes up a little bit that's because there's more than just the stock price that goes into option value there's actually six things the strike price the actual price of the stock the dividend yield the prime interest rate how far or how near you are to the expiration date or time decay so the closer you are the less value it actually has because just imagine if you were a person and you actually had the money to buy that 100 shares do you want to wait until the same day that the option contract expires i'm not gonna have time to do my flip like i want to relax i mean if i'm sitting here with seventeen thousand dollars i'm still probably on the beach somewhere i might not get to until today till tomorrow so no i need more time so that's why the more time you have the more valuable the contract is okay and then the last thing is the volatility of the stock so because these different because all of these different things make up the price it's really possible for the price of the stock to go up but to actually have your option contract price go down or the value and that's definitely happened to me before the first time that i bought an option i was so confused because i bought a i bought a call and i thought that i was just going to hold on to it the longer i held on to it the more money i was going to get but no the longer i held onto it the less money i was getting and then it would start to drop because it was losing value and i was just so upset and i was like what the hell is this i don't like this mess but you can't be afraid you have to if you fall out that horse you have to get back on a child don't worry about it so you see here each contract gives you the value of 100 shares and then right here you're going to click and this is essential other things that go into the value like here's the implied volatility and then the greeks okay so first before you even buy an option make sure that you check out the volume and the open interest so volume that's basically the okay so volume versus open interest they're two different things volume refers to the number of contracts traded during a given period and open interest is the number of contracts that are active so the number of contracts that are actually going on so open interest you know as long as there's somebody that has it that's a pretty good sign and then the volume it just kind of seems like the volume how thick it is how filled up it is is it good how much is going on over a given time period so you want to make sure that you have a good volume a good height the higher the volume and the open interest the better that this move is going to be because that means there's a lot of people going in and out there's a lot of people that are willing to buy and sell if nobody's willing to buy or sell this isn't going to work because this is actual contracts between you and other people like this isn't between you and a computer no if there's somebody on the other end of that screen that's saying i hope that that i hope you're wrong because i'm taking your money you know that this is what it is you know it's kind of like it's it's pretty innovative it's really nice and so the greeks down here i'm not going to go into the greeks right now but the greeks really have a lot to do with the value of the option so like i know a higher delta is better for you the lower the delta the the less good you're going to be doing with the option um let me see implied volatility and so implied volatility is the market forecast of movement in a securities price because we always say volatility is really really good you want a lot of volume and a lot of volatility because when the price goes up and down that is you know that's basically possible profit point for both sides up down up down so implied volatility means that it's going gonna move and that's what we want unless we don't want the stock to move like if you chose the one we're just going you would want to lower implied volatility for that we want it to go up and down or up or down whatever implied volatility is important so yeah another thing i want to talk about is at the money in the money and out of the money so let's go back here and so let's look we have it here so a call option is in the money when the actual price of the stock like the market price of the stock is higher than the strike price so for a call all of these above this price those are in the money so yeah you see how we have the share price and we have 19 so so all of these strike prices underneath the share price those are all in the money and that's why the further you go down the more they're going to cost because they have more value they're more in the money you know that you're going to make profit because we make profit however high up above the strike price is so you multiply that by 100. like let's say if we had this let's say if we bought it like yeah you remember from the other example when we started off at one dollar and then it or three dollars and it jumped up to the eight you saw how much that was so so the further you go down the more money we get just like on ours we started from here to three and let's go all the way up here yeah that's a big difference sheesh so that's in the money and if it's out of the money that just means that it's not currently there we have to wait for a little bit to see what happens like all of these above it not at 20 or 21 22 it has to it has to get there so that's kind of a gamble um so that's why it's called out of the money because we're not for sure making profit yet we have to see what happens over time and then at the money is when the strike price is the same as the share price so that's kind of like the break even we're at the money so we're not losing we're not gaining we're just at the money i just want to make sure i show you how that you can make sure your account is set up to do options so you're just gonna make sure you click click up there top right and go to yeah you have to go to investing and you just have to turn on option trading that's how you get to it the same place you get to your day trades and stuff like that i mean that's pretty much it for the options uh i'm going to be doing more videos down the line about options and strategies and actually showing you in real time but i think for now i just wanted you to have a really good understanding of what options are how you can get into it and why are there better than buying just outright shares of stock i want to say better but they're definitely they give you more opportunity to make money more money from your investment so if you want to make more money fast options are the way to go but you really want to be knowledgeable and you know know what you want to know what you're doing what you're getting yourself into so that's pretty much it that's all i have for this video tell me are you interested are you are you trading options right now leave a comment below and tell me what you think about options and if you feel like you're ready to start trading options i'm interested to know so let me know in the comments below just please make sure that you click that thumbs up button if you found any type of value from this video click the thumbs up button and make sure that you subscribe click that notification bell so you get notified any time i upload a new video for you guys and yeah i'll see you on the next video i appreciate you guys so much all right [Music] you

Channel: Black Girl Stocks

Views: 472,943

Rating: 4.9198265 out of 5

Keywords: black girl stocks options, options trading 101, black girl stocks, options 101, stock options for beginners, options trading stocks, options for beginners, robinhood options, Options trading, trading options, options trading for beginners, how to trade options, options trading explained, how to trade options on robinhood, options trading, stock options, trading options on robinhood, options trading for beginners robinhood, stock market, investing, robinhood

Id: LditBSjInpU

Length: 28min 40sec (1720 seconds)

Published: Wed Sep 23 2020