About Option Trading An introduction to the basics Brought to you by TD Ameritrade

Why options?

Learning to trade options can open up new avenues for risk and reward. Find out how a strong knowledge of option strategies can help you confidently spot and act on more potential trading opportunities.

What are options?

An option is a contract that gives the owner the right to buy or sell an underlying asset at a specific price over a specific period of time. Like a stock or bond, an option is a security, but it's also a binding contract with strictly defined terms.

"Call" options give someone the right to buy an asset, while "put" options give someone the right to sell an asset. An option owner, or "buyer," pays an option seller, or "writer," for the right to exercise an option contract. If the buyer decides to exercise the contract the seller must sell or buy the underlying stock at the price agreed upon (known as strike price).

Types of options Party Right/obligation Position Desired result
CALLS Buyers (owners) Right to buy a stock Long calls Price of the call rises as the price of the stock rises. Sell the call for more than you paid for it.
Sellers (writers) Obligated to sell a stock Short calls Stock price is less than the strike price. Keep the premium received or buy the call for less than you sold it for.
PUTS Buyers (owners) Right to sell a stock Long puts Price of the put rises as the price of the stock falls. Sell the put for more than you paid for it.
Sellers (writers) Obligated to buy a stock Short puts Stock price is greater than the strike price. Keep the premium received or buy the put for less than you sold it for.
  • Calls
    • Buyers (owners)
      • Right to buy a stock
      • Long calls
      • Price of the call rises as the price of the stock rises. Sell the call for more than you paid for it.
    • Sellers (writers)
      • Obligated to sell a stock
      • Short calls
      • Stock price is less than the strike price. Keep the premium received or buy the call for less than you sold it for.
  • Puts
    • Buyers (owners)
      • Right to sell a stock
      • Long puts
      • Price of the put rises as the price of the stock falls. Sell the put for more than you paid for it.
    • Sellers (writers)
      • Obligated to buy a stock
      • Short puts
      • Stock price is greater than the strike price. Keep the premium received or buy the put for less than you sold it for.

Choose your level of learning

Whether you're new to options or looking for new option strategies, you'll find useful content to help accelerate your learning and potentially lead to more trading opportunities:

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Resources and tools from TD Ameritrade

thinkorswim® Learning Center


Learn about the thinkorswim trading platform from TD Ameritrade with video tutorials on how to customize the platform and place option trades, plus get a step-by-step platform guide and updates on new features

Learn more

TD Ameritrade Network


An informed investor is a confident investor. Especially when equipped with real-time market insights and strategy education—straight from industry pros. Cue the TD Ameritrade Network. This programming doesn't just bring you the news, but interprets it. To help you understand how to apply what's going on in the markets to your strategies—and have more confidence to strike when the time is right.

TD Ameritrade Network. Empowering every investor and trader—every market day.

Open the Trader TV module in the thinkorswim platform > Select "TD Ameritrade Network" from the drop-down menu
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