How To Buy Stock Options -

Start small. Many beginners lose their initial capital by "swinging for the fences" on contracts that expire in just a few days.

Brokers assign "levels" (usually 1–4). Level 1 might only let you write covered calls, while higher levels allow for more complex (and risky) strategies. 2. Learn the Two Main Flavors There are only two types of options you need to know: how to buy stock options

This is the price you pay for the contract. Note: One option contract usually controls 100 shares . If the premium is listed as $2.00, the contract will actually cost you $200. 4. Place Your Order When you’re ready, you’ll select "Buy to Open." Start small

If the stock moves in your favor and the option's value increases, you can "Sell to Close" to pocket the profit. Level 1 might only let you write covered

If your bet was wrong, the option might become worthless. In this case, you simply lose the money you paid for the premium.