Options basics
Every options explanation is written for the buyer. That is fine until you sell one, at which point every sign flips and the risk moves to your side of the table. Twelve articles below, in the order they build on each other, all running on a single chain so the numbers agree from page to page.
- What an options contract isAn option is a standardized contract covering 100 shares, issued and guaranteed by the OCC, that gives the buyer a right and hands the seller an obligation. What the 100 multiplier does to the numbers, why the two sides are not symmetric, and what you are really agreeing to when you sell one.
- Calls against puts, for sellersOn one chain the $34 put is a lower delta than the $43 call and pays 25 percent more premium. Why the put side pays better at the same risk, what each side ties up, and the reason the choice is usually made by what is already in your account.
- Strike, expiry and premiumMove the strike and the premium moves faster than the risk. Move the expiry and the premium per day goes one way at the money and the other way out of the money. Three expiries and ten strikes on one chain, with the per-day arithmetic that most sellers never run.
- How to read an options chainA worked chain, column by column: strike, bid, ask, mid, implied volatility, delta, volume and open interest. Which four columns a seller actually uses, which one lies, and why the strike with the most open interest on this chain is the wrong one to sell.
- Bid, ask, mid and markThe mid is a calculation, not a price. On one chain a nickel-wide market costs 6.8 percent of the premium at one strike and 14.3 percent at another. What each price means, which one to plan with, and how to work a limit order without chasing.
- Intrinsic and extrinsic valueExtrinsic value is the only part of an option a seller collects, and it peaks at the money. On one chain the $39 call carries $1.83 of it and the $39 put carries $1.63, and the 20 cent gap is exactly the interest on the strike. Worked across ten strikes.
- In, at and out of the moneyA call is in the money above the strike and a put is in the money below it, which sounds obvious until you are short one. What each zone does to your premium, your assignment odds and your break-even, worked across one chain.
- Why option sellers get paidThe premium is not a yield and it is not free money. It is the price of an obligation, and the theoretical expected value of the contract itself is zero. What is left after that is about two points of volatility, worth a few dollars a month on a small position.
- The four basic option positionsLong call, long put, short call, short put. One strike, one expiry, and the payoff of all four at six different stock prices. Which two a premium seller ever uses, and why the third is the one that ends accounts.
- American against European exerciseAmerican-style options can be exercised any trading day, European-style only at expiration. Every listed US equity option is American. The difference decides whether early assignment is possible at all, and index options remove it entirely by settling in cash.
- Open interest against volumeVolume counts today. Open interest counts every contract still outstanding, and it is published once a day after the clearing house processes overnight. On one chain the heaviest strike has 22,107 open and the quietest has 640, which is the difference between a fill and a wait.
- Spotting an adjusted option contractAn adjusted contract sits on the same chain as a normal one, often pays a suspiciously good premium, and may not deliver 100 shares. How to recognise one, why your covered call may no longer be covered, and why the honest advice is to leave them alone.
Read them in this order
If you have never traded an option: what the contract actually is, then the four positions and what each risks, then how to read a chain. Those three are enough to follow every other page on this site.
If you already trade a little and want the pages that fix a real misunderstanding: the part of the premium that is actually yours, why the decay rule reverses on far strikes, and where the money genuinely comes from, which is less of it than you have been told.
One chain, twelve articles
Every number here comes off a single illustrative snapshot: DKNG at $38.40 on a Tuesday, the September 19 monthly, 45 days out, at 4.2 percent, with implied volatility running from 47.0 percent at the $32 put down to 34.1 percent at the $45 call. Bids, asks, volumes and open interest are plausible figures rather than quotes; every price, delta and probability was computed through Black-Scholes rather than asserted.
What this series will not tell you
That options are complicated. They are not. A contract has four terms, there are four things you can do with one, and the arithmetic is subtraction. What is hard is sizing, execution and sitting still, and none of that is a vocabulary problem.
It also will not tell you that selling premium is income. The expected value of a fairly priced contract is zero, the real edge is roughly two points of implied volatility, and on the worked position that is about nine dollars over six weeks. That page publishes the number rather than the pitch.
And it will not explain how the OptionsKing confidence score is computed. Contract mechanics are public and belong in public. What the engine does with them stays private: the score feeds a ranking and the app shows you the highest-ranked handful of what it found, and how it works covers what that guarantees.
Questions people actually ask
What is an option, in one sentence?
A standardized contract on 100 shares that gives the buyer a right, to buy at a fixed price with a call or sell at a fixed price with a put, and hands the seller the matching obligation until it expires or is closed.
What do I actually need to know before selling my first option?
That one contract is 100 shares, that the premium you keep is only the extrinsic part, that the strike and the expiry are the two dials, and that you cannot refuse assignment. Four pages in this series cover those and nothing else is urgent.
Should I learn to buy options before selling them?
No. They are different jobs. Buying needs a view on direction and timing; selling needs a view on price and a willingness to own or deliver shares. Almost every free options course teaches the first one, which is why the sign on every Greek has to be flipped.
Do calls and puts pay the same premium?
No. On the worked chain the $34 put is a lower delta than the $43 call and pays 25 percent more, because downside strikes carry higher implied volatility. That skew is the reason the two seller strategies are not mirror images.