Want to learn Options but don't understand how they work?
Here's a simple analogy to help
Imagine there's a popular concert coming up, and you think the ticket prices will go up as the date gets closer.
Right now, you have the option to reserve a ticket for $50.
You pay a small fee, say $5, to lock in this price, but you're not obligated to actually buy the ticket later.
As the concert date gets closer, the ticket prices shoot up to $100, you can still buy your ticket for the originally agreed-upon $50.
This means you could go to the concert for much less than everyone else or even sell your reserved ticket for a profit.
However, if the concert doesn’t gain popularity and ticket prices drop to $30, you wouldn’t want to buy the ticket for $50.
In this case, you simply lose the $5 reservation fee, but you’re not forced to buy the ticket at the higher price.
In this analogy:
✅ The concert ticket is like the stock.
✅ The reserved price ($50) is the strike price of the call option.
✅ The small fee ($5) is the premium you pay for the call option.
✅ The increase in ticket price to $100 represents the stock price rising above the strike price.
✅ Choosing not to buy the ticket if prices drop to $30 is like letting the call option expire worthless.
The best part about Options is you get to make more with less.
You get more bang for your buck!
Director of Talent Acquisition at Hyve Group
2moRun don’t walk to get tickets!! Last year Jade Trup-Davis and I met a celebrity 🤩