Advanced Options Trading -- Buy Call/Sell Put

Many friends are new to options and get confused when they hear terms like Buy Call, Sell Put, exercise, and close positions. But in reality, it's much simpler if you think of it as a game with 'rent', 'deposit', and 'buy/sell options'. Many friends are interested in option buyers and sellers. Today, I'll use a down-to-earth approach to help you truly master the four basic strategies of options:
First, you need to understand a core concept: Are you buying or selling options?
Option buyers: Bet on a significant rise or fall in the market, using small money to chase big opportunities.
Option sellers: Collect premiums, betting that the market won't fluctuate violently—no big rise or falls.

1. Buy Call (Buy Call) — Place a 'deposit' in advance if bullish
You believe a stock will rise in the future but don’t want to buy a large amount at once? You can spend a small amount to buy the right to 'purchase the stock at a low price in the future'.

Example:
You want to buy Tesla. Today’s price is $316, and you spend $5 to buy a Call option allowing you to buy at $326 in three months (this is the strike price). If the stock rises to $366 in three months, you profit!

Cost: $5

Profit at expiration: $366 - $326 - $5 = $35

Who is it for?

Beginners who want to bet small for big gains and have a bullish outlook.

But don’t go all-in—time is poison; slow rises can still lose you money.

2. Buy Put (Buy Put) — Buy 'insurance' if bearish
If you’re worried a stock might fall, you can spend some money to buy the right to 'sell at a high price in the future'.

Example:
You hold Nvidia at $173 and worry that the AI hype might fade in six months. You buy a Put with a strike price of $153 for $10. If Nvidia drops to $100 in six months, you can sell at $153, effectively hedging your position.

Who is it for?

Those holding stocks but worried about declines.

Those shorting a stock they don’t want to borrow.

3. Sell Call (Sell Call) — 'Rent out' your stock to earn 'rent'
If you already own a stock and don’t plan to sell immediately, you can 'rent it out' via Sell Call, collecting premiums as income.
It’s best to own the stock when selling calls!!

Example:
You hold 100 shares of HOOD at $104 and sell a $114 Call for $3 in premium. As long as Apple doesn’t rise above $114, you keep the $3. Even if it does, you sell at $114, making $10 in price difference plus $3 in 'rent'.

Who is it for?

Long-term holders willing to sell at higher prices.

Those who want to 'earn passively' in sideways markets.

Note: If the stock surges and the option is exercised, you must sell the stock (don’t Sell Call lightly if you don’t want to sell).

4. Sell Put (Sell Put) — Catch falling knives and earn 'rent'
Sell Put means: 'I’m willing to buy this stock if it falls, but you have to give me something in return first.'

Example:
You like HOOD at $114 and place a Sell Put at $90 strike, collecting $2 in premium. If it doesn’t drop below $90, you keep the $2. Even if it does, you buy at an effective cost of $88.

Who is it for?

Those looking to buy quality stocks at lower prices.

Those who want to 'bargain hunt' while earning income.

Note: If the stock crashes, you’ll need funds to buy the assigned shares.

What to do at expiration? Three strategies:

1. Close the position (most common and flexible)
   Sell the option contract to lock in profits.

For: Those wanting to secure profits, avoid exercise, or with limited funds.

1. Exercise
   Actually buy or sell the underlying stock.

For: Those who genuinely want to hold (Buy Call) or sell (Buy Put) the stock.

1. Roll over (keep collecting rent)
   For example, if a Sell Call expires and you still hold the stock, sell another Call for the next month, snowballing your 'rent'.

Advice and insights:
After years in the market, I’ve learned: Options aren’t gambling; they’re strategy. Think of it like farming:

Buy Call is leasing land in advance;

Sell Put is setting up a stall to buy cheap produce;

Sell Call is selling part of your harvest for profit;

Buy Put is buying pesticide insurance in case of pests.

Key: Don’t go all-in, don’t bet recklessly, and don’t assume selling is risk-free (the market isn’t always gentle).

Beginners should start with Buy Call / Sell Put to practice. Once you’ve got the rhythm, learn combo strategies. Remember:

'Option profits are rewards for managing risk.'

Don’t rush to get rich—understand the rules, or the market will teach you a lesson.
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