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title: "Options Trading Basics — Calls, Puts, and Strategies | Stock Expert AI"
description: "Options trading basics: understand calls, puts, strikes, expirations, and the most common strategies. With risk warnings."
---

# Options Trading Basics — Calls, Puts, and Strategies | Stock Expert AI

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## Options Trading Basics

Calls, puts, strikes, and expirations — plus the risks. Options offer leverage but can expire worthless. Learn before you trade.

## Quick Answer

Options are contracts that give the buyer the right (not obligation) to buy (call) or sell (put) a stock at a specified price (strike) by a specified date (expiration). Call buyers profit if the stock rises above the strike; put buyers profit if it falls below. Options offer leverage (small cost controls 100 shares) but can expire worthless if the strike isn't reached. Common strategies: covered calls (income on holdings), protective puts (downside insurance), long calls/puts (directional bets). Options are risky — retail traders lose 70-80% of the time.

## Calls vs. Puts

A Call gives you the right to BUY shares at the strike price. You profit when the stock rises above (strike + premium paid). A Put gives you the right to SELL shares at the strike price. You profit when the stock falls below (strike - premium paid).

## Key Terms

Strike price: the pre-set price at which you can exercise the option. Expiration: the last day the option is valid. Premium: the price you pay to buy the option. In-the-money (ITM), at-the-money (ATM), out-of-the-money (OTM): options' relationship to current stock price.

## Covered Call Strategy

Own 100 shares, sell 1 call at a higher strike. You collect the premium as income. If the stock stays below the strike, you keep both the shares and the premium. If it rises above, you sell the shares at the strike (capped upside).

## Protective Put Strategy

Own 100 shares, buy 1 put at a lower strike. Acts as insurance: if the stock crashes, the put gains value offsetting your loss. Cost: the put premium.

## Risks

Options can expire worthless — 100% loss. Time decay (theta) eats premium daily. Implied volatility changes affect pricing. Options are not suitable for anyone without education on these risks. Always consider position sizing and risk management.

## Related Tools

- [Investment Guides](https://www.stockexpertai.com/guide)
- [How to Buy Stocks](https://www.stockexpertai.com/guide/how-to-buy-stocks)

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## Disclaimer

All content on Stock Expert AI is for educational and informational purposes only. Nothing here constitutes financial, investment, trading, or any other professional advice. Users should consult qualified financial advisors before making investment decisions.

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