gotsand said:
You're correct. Each call option entitles you buy 100 shares of the underlying issue at the strike price. So your $0.50 example is $50 per contract (100 shares). If you sell prior to expiration, you net the difference between current price and your basis. There are many nuisances such as volatility, time decay, etc. which require attention. And, yes if the issue is not in the money at expiration and you take no action it is a 100% loss.
And, depending on platform used, if options are even as much as a penny in the money you can get shares assigned. Caution there!
Read TastyTrade and other books/Resources people have posted on here.
But DO NOT under any circumstances open a trade of 100 options. My average option trade is 120 after 27 years. My largest option trade has been 750.
What I would open a Robinhood account with options added on. While you are reading up on learning the ins and outs buy 2 (TWO) options. That's leveraging 200 shares but it's not important.
What you want to do is experience the movements in premium, feel premium decay as the maturity date approaches. If the options get up over 50% then sell 1. Then make sure as you watch the other one you stop loss if it deteriorates to half your purchase price. Net effect of that is no loss.
And if it never moves upward sell both at 50% of investment. It really doesn't matter win or lose because the big picture is getting a healthy understanding, and respect, for option trading.
Make sense?
