To see my 10 Delta Short Strangles strategy, click the upper-left button above.

For a day-by-day Trade Log of the latter part of my first Short Strangle campaign (March-June, 2021), click that button. The account doubled in 13 weeks and 2 days.

For my current real-time campaign that started June 21, 2021, click the “2nd Campaign” button.

For my take on options basics, read on below.

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You know what stocks are: you buy a a share that lets you own a tiny fraction of a company and thereby theoretically participate in its success (or non-success). If the company pays a dividend you get to collect those as long as you own shares. That’s the most fundamental and traditional way of investing. If the price of the stock goes up, you make money. If it doesn’t, you don’t (except for possible dividends).

An option is a contract between a buyer and a seller that you gives the contract holder the right (but not the obligation) to buy or sell a specified number of shares of a particular stock at a certain price before a certain date. In real life you might make a contract with someone and give them a small sum of money as a deposit on a house or piece of land or a car you’re interested in buying; they hold the asset for you for some set period of time with the agreement that you’ll buy it for the price specified by the contract. If someone comes along and offers them a better price than you, they can’t sell it because they’re bound by your contract (the seller of the contract has the obligation to fulfill its terms). If you later decide not to complete the purchase you don’t have to, but you’ll lose the deposit or premium you gave the seller.

It works the same way for stocks (and ETFs, and some other more-esoteric things). If you buy a call option then you have the right to buy 100 shares of, say, Amazon stock. But why would you do that instead of just buying shares of AMZN? Well for one thing, AMZN sells for $3200 per share right now, and maybe you have a small account and don’t want to lock up that much capital. But for about $8800 (2.7% of the price of 100 shares) you can buy a call option that will give you the right (but again, not the obligation) to buy 100 shares of AMZN at 3200 30 days from now. You’re probably thinking: “I don’t have enough money to buy 100 shares of AMZN!” Don’t worry, you don’t have to. Just like we buy stocks hoping/thinking they’ll go up, we buy options for the same reason. If the price of the call option increases anytime before expiration you can simply sell it, no need to buy 100 shares of the stock.

But what if you were wrong about Amazon and its price goes down over the next 30 days? Well, your call option starts to lose value too, because who wants to own a piece of paper that lets them buy AMZN at 3200 if the stock price is now 3000? The option declines in value over time, eventually becoming worthless when the expiration date is reached.