Options 101

Dive into the basics of options trading and unravel the core options building blocks of calls and puts. Options are frequently used by traders to capitalize on market movements, protect positions against losses, or generate income from existing holdings. They also come with many risks that are important to consider, and are not suitable for all traders.

Types of Options

Options are contracts that give traders the right, but not obligation, to buy or sell equities at a set price at or before a specified expiration date.

There are two primary types of options:

Call options: Calls provide traders the right to buy an equity at a predetermined price at or before expiration. Traders frequently use calls to profit from anticipated listed equity price rises above the strike price or capitalize on a bull market.
Put options: Puts grant the right to sell an market instrument at a predetermined price at or before expiration, offering a safeguard against losses or a strategy for capitalizing on a downward market.

Getting Started with Options

Applications
Options often give traders the ability to capitalize on market movements with less capital, generate income through premiums, and protect listed equity holdings from adverse price movements, or add versatility to position books.
Managing risk
It’s important to always balance risk against any potential rewards. Buying options risks losing the entire cost, or premium, of the option if the market moves unfavourably. Selling options, referred to as going short, poses potential unlimited losses if the market moves against your position. Learn More about the various risks associated with options trading.
Where to start
Educate yourself on option concepts, strategies, and risks before entering positions. Leverage resources like profit and loss charts on platforms like GTCX TradeDesk to visualize potential outcomes and make informed decisions.

Market Access services for US-listed securities and options offered through GTCX TradeDesk, member applicable requirements & applicable requirements. Supporting documentation upon request.

The examples used above are fictional, and do not constitute a recommendation or endorsement of any position.

Options are not suitable for all traders and carry significant risk. Certain complex options strategies carry additional risk. There are additional costs associated with option strategies that call for multiple purchases and sales of options, such as spreads, straddles, among others, as compared with a single option trade.

Prior to buying or selling an option, traders must read the Characteristics and Risks of Standardized Options, also known as the options disclosure document (ODD).

Option strategies that call for multiple purchases and/or sales of structured contracts, such as spreads, collars, and straddles, may incur significant transaction costs.