options basics

Also read – When does it make sense to buy options?

and Stocks vs. options

How far out should I buy (how far out should the expiration date be)?

At least 45 days. Preferably 60 days or more. The greater this is, the longer time you have to sell/cover your option even before it reaches expiration.

Should I cover/sell my options before expiration? Or wait till expiration?

Almost always, cover before expiration (if you are already in the green). This will help avoid any unpleasant downswings.

What if, at expiration, it is somewhere between your strike price and your break even?

Then you only lose a part of what you paid in premium.

What if it reaches expiration without reaching your strike price?

All your premium money is gone.

Delta

The delta is the amount that the option gains for  every dollar increase in the share price. so – a delta of 0.8 means that  , for every $1 that the share price goes up, the option price increases by 80 cents (it becomes 80 cents more expensive to buy the same option)

Theta

Theta is usually negative – it means that  the option loses money over time. For every day, theta is how much you lose due to the time erosion.

A good video?

Try this youtube video