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Message: [QUOTE="Niastri, post: 3705916, member: 722"] Options get very complicated, because there are calls and puts and they can be used in different combinations, but the concept is simple. With a call option, you pay someone for the right to buy 100 shares of the stock for a specific price. The right lasts for a specific amount of time before expiring. As an example, yo pay me $1/share for the right to "call" my shares at say $25/share. If you decide to call my shares, you pay me $2500 for the shares plus the $100 you already paid for the call. You, in this case, are betting that the stock will go up enough to make it worth your while. I'm selling you that option to call my shares because I don't think the stock will go above $25. If it doesn't in the specific time, your option expires worthlessly. Using my real example from this week, a few months ago I bought $4 AMC calls set to expire in June 2021. I didn't love AMC, but I didn't think the pandemic would kill them and figured it would all unwind by then. So, at any time before June, I could buy 100 shares for $400. I paid $111 for the call option. AMC was trading for about $3.60 at the time. This is one benefit of buying calls instead of the actual stock. I have a right to 100 shares without paying full price. After that purchase, the stock tanked, going really low as things looked grim for AMC going out of business. The call dropped to almost worthless. At least I only spent $111 instead of $360, I figured. But then AMC got a round of funding which will get it through the end of the year. The stock popped back to about $5 and then yesterday, pandemonium. My option was in the money, so the value went up dramatically. In addition to the time value, every dollar over the price of the call increases the value of the call roughly dollar for dollar. I was able to sell for ~$1300 the $4AMC calls because the stock price went as high as $19. I felt like this big of a gain was worth taking off the table and sold out before then. Could have made more, but didn't trust it would keep rising. Other trades I made were even better.The price action was crazy. [/QUOTE]

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