options
trading
starter kit
A beginners guide to
understanding options
and making your first
profitable trade!
IMAGINE HOW IT WILL
FEEL...
...to have a fun, flexible options trading
side hustle. One that you can do from
anywhere, on your own time. Not only
will you have an extra income stream to
rely on in these uncertain times, but it
will be a very time-efficient side gig you
can do anytime, anywhere.
I'm talking whipping open your laptop
in a coffeeshop in France, Bali, Mexico
(or wherever you are!) and create an
income on your own terms.
With an understanding of options trading, you'll also be able to generate a
return whether the market is going up, down, or sideways, and use moneymaking strategies that until now, only the financial elite knew about.
Rather than holding your breath waiting for the next big market apocalypse,
you can generate consistent cashflow every single week, no matter what the
market is doing:
1
GETTING STARTED
WITH OPTIONS TRADING
A solid understanding of options trading starts with
wrapping your head around these three things:
1. What is an option?
2. What are the types of options?
3. What are the ways to make money with options?
I'm going to walk you through EVERYTHING, step-bystep in this Starter Kit. Let's go!
2
part
01
WHAT IS AN OPTION?
First things first... what the HECK is an option? Let's start with the
textbook definition:
"An option is a contract between two parties for the purchase or
sale of an asset at a specific price, by a specific date."
If you're anything like me though, textbook definitions don't do
much for you.
So let's break it down!
HOW AN OPTIONS CONTRACT WORKS
STOCK
STOCK X
Justin
Jaclyn
Let's say that Stock X is currently trading at $50, and Justin and Jaclyn make the
following agreement:
Justin can buy Stock X from Jaclyn for $100 at any time on or before Dec
30. So regardless of what Stock X is worth on the open market, if Justin
wants, he can buy it from Jaclyn for $100. As compensation for the risk
Jaclyn is taking on, Justin pays Jaclyn $15.
3
This agreement can be dissected into four components:
1.
2.
3.
4.
Underlying Asset:
Strike Price:
Expiry Date:
Premium:
Stock X
$100
Dec 30
$15
STOCK
STOCK X
Justin
(Option Buyer)
Underlying Asset: Stock X
Strike Price: $100
Expiry Date: Dec 30
Premium: $15
Jaclyn
(Option Seller)
In exchange for $15, Justin has the
Premium
right to buy Stock X for $100 from
Underlying Asset
Strike Price
Jaclyn any time on or before Dec 30.
Expiry Date
Justin (Option Buyer)
Jaclyn (Option Seller)
pays the $15 premium
receives the $15 premium
has the right to buy the
underlying asset from
Jaclyn at $100
has the obligation to sell
the underlying asset to
Justin at $100
4
Great job! Now it's time to test your knowledge with a short quiz 😊
QUIZ
1. The ______________ has the right and pays the premium.
a. Option buyer
b. Option seller
2. The ______________ has the obligation and receives the premium.
a. Option buyer
b. Option seller
3. Every option contract has these 4 components ___________,
___________, ___________, and ___________.
a. Underlying Strike, Name, Expiry Date, Starting Price
b. Underlying Asset, Strike Price, Expiry Date, Premium
c. Underlying Buyer, Underlying Seller, Strike Price, Cost
Answers
1. a
2. b
3. b
5
part
02
WHAT ARE THE TYPES OF OPTIONS?
Now it's time to learn about the 2 different types of options...
Calls vs. Puts!
Call Option - The right to buy the underlying stock at a specific
price, by a specific date.
Put Option - The right to sell the underlying stock at a specific
price, by a specific date.
The difference between calls/puts can be summarized by the
following grid:
YUB
LLES
CALL
PUT
right
right
to buy
to sell
you pay premium
you pay premium
obligation
obligation
to sell
to buy
you receive premium
you receive premium
The key takeaway from this grid is that regardless of whether it's a Call or Put, an
option buyer PAYS premium, and an option seller RECEIVES premium.
Furthermore, the option buyer's right is the option seller's obligation.
6
Great job! Now it's time to test your knowledge with a short quiz 😊
QUIZ
1. A Call option buyer has the right to ______ the underlying stock.
a. Buy
b. Sell
2. A Put option buyer has the right to ______ the underlying stock.
a. Buy
b. Sell
3. Since an option buyer's right is the option seller's obligation,
with a Call option, the buyer has the right to _______ and the
option seller has the obligation to _______.
c. Buy, Buy
a. Buy, Sell
d. Sell, Sell
b. Sell, Buy
4. Since an option buyer's right is the option seller's obligation,
with a Put option, the buyer has the right to _______ and the
option seller has the obligation to _______.
c. Buy, Buy
a. Buy, Sell
d. Sell, Sell
b. Sell, Buy
Answers
1. a
2. b
3. a
4. b
7
part
03
HOW DO YOU MAKE MONEY WITH
OPTIONS?
So far, you learned what an option is, and that there's 2 types of
options: Calls or Puts.
But so what, right? Show me the monayyy!
Here's the deal: There are only TWO things you can do with an
option: sell it or buy it.
And since there are only TWO types of options (Calls or Puts), that
makes FOUR possible trades:
YUB
CALL
PUT
BULLISH
BEARISH
you think market will go
LLES
BEARISH
you think market will go
↑
↓
you think market will go
↓
BULLISH
you think market will go
↑
These 4 trades are the foundation of all money-making options
trades, so let's dive in a little deeper!
8
TRADE #1: BUYING A CALL
Remember Justin? Let's say he bought the below Call option:
1.
2.
3.
4.
Stock X
$100
Dec 30
$15
Underlying Asset:
Strike Price:
Expiry Date:
Premium:
if stock goes up,
Justin makes money!
$150
$100
right to buy
at this price
$ 50
if stock goes down,
Justin loses money!
If stock goes UP to $150, Justin will exercise his right to buy at $100,
pocketing the difference between the Strike Price and Market Price less the
Premium he paid.
$150
Market Price
-
$100
Strike Price
-
$15
Premium Paid
=
+ $35
Justin's Profit
If stock goes DOWN to $50, Justin won't exercise his right to buy at $100,
resulting in the option expiring worthless and losing the Premium he paid.
- $15
Justin's Loss (only the premium he paid)
9
TRADE #2: SELLING A CALL
Now let's look at Jaclyn, who sold the Call option:
1.
2.
3.
4.
Underlying Asset:
Strike Price:
Expiry Date:
Premium:
Stock X
$100
Dec 30
$15
if stock goes up,
Jaclyn loses money!
$150
$100
obligation to sell
at this price
$ 50
if stock goes down,
Jaclyn makes money!
If stock goes UP to $150, Justin will exercise his right to buy at $100,
obligating Jaclyn to sell to him at $100. Jaclyn's loss is the difference between
the Market Price and Strike Price, partially offset by the Premium she received.
$100
Strike Price
-
$150
Market Price
+
$15
=
Premium Received
- $35
Jaclyn's Loss
If stock goes DOWN to $50, Justin won't exercise his right to buy at $100,
resulting in the option expiring worthless and Jaclyn being able to walk
away with the Premium she received.
+ $15
Jaclyn's Profit (only the premium she received)
10
TRADE #3: BUYING A PUT
Now it's time to talk about Puts. Let's say that this time, Justin bought a Put
option instead of a Call option:
1.
2.
3.
4.
Underlying Asset:
Strike Price:
Expiry Date:
Premium:
Stock X
$100
Dec 30
$15
if stock goes up,
Justin loses money!
$150
$100
right to sell at
this price
$ 50
if stock goes down,
Justin makes money!
If stock goes UP to $150, Justin won't exercise his right to sell at $100,
resulting in the option expiring worthless and losing the Premium he paid.
- $15
Justin's Loss (only the premium he paid)
If stock goes DOWN to $50, Justin will exercise his right to sell at $100,
pocketing the difference between the Strike Price and Market Price less the
Premium he paid.
$100
Strike Price
-
$50
Market Price
-
$15
=
Premium Received
+ $35
Justin's Profit
11
TRADE #4: SELLING A PUT
Now let's look at Jaclyn, who sold the Put option:
1.
2.
3.
4.
Underlying Asset:
Strike Price:
Expiry Date:
Premium:
Stock X
$100
Dec 30
$15
if stock goes up,
Jaclyn makes money!
$150
$100
obligation to buy
at this price
$ 50
if stock goes down,
Jaclyn loses money!
If stock goes UP to $150, Justin won't exercise his right to sell at $100,
resulting in the option expiring worthless and Jaclyn being able to walk away
with the Premium she received.
+ $15
Jaclyn's Profit (only the premium she received)
If stock goes DOWN to $50, Justin will exercise his right to sell at $100,
obligating Jaclyn to buy from him at $100. Jaclyn's loss is the difference between
the Market Price and Strike Price, partially offset by the Premium she received.
$50
Market Price
-
$100
Strike Price
+
$15
=
Premium Received
- $35
Jaclyn's Loss
12
Great job! Now it's time to test your knowledge with a short quiz 😊 Feel free to
refer back to the illustrations to help you think through your answer!
QUIZ
1. If you think the market will go up, you could either:
a. Buy a Call or Sell a Put
b. Buy a Call or Buy a Put
2. If you think the market will go down, you could either:
a. Buy a Put or Sell a Call
b. Sell a Call or Sell a Put
3. If the stock moves against you as an option buyer, your loss is
the __________.
a. Strike Price
b. Premium paid
c. Premium received
4. If the stock moves in your favor as an option seller, your profit is
the __________.
a. Strike Price
b. Market Price
c. Premium received
Answers
1. a
2. a
3. b
4. c
13
printable cheatsheet
Below is a printable cheat sheet that summarizes everything you just learned.
Tape it to your wall, and tattoo it onto your body! You'll find yourself referring
back to it again and again each time you place an option trade. Heck, even after
8 years of options trading, I still find this visual extremely helpful. If you
understand this grid, you are ready to start making an income with options!
CALL
PUT
↑
BULLISH
BEARISH
YUB
↓
right to buy
right to sell
pays premium
pays premium
BEARISH
↓
LLES
obligation
BULLISH
↑
obligation
to sell
to buy
receives premium
receives premium
14
WHAT IT'S LIKE BEING AN OPTIONS TRADER
Knowing how to trade options brings in an *almost*
effortless $1K+ or more for me each month. Unlike other
side gigs where you have to hustle for hours and hours on
top of your 9-to-5 in exchange for a measly amount of
dollars, an options trading side hustle allows you to
generate income in the comfort of your PJs, wherever you
are in the world.
An options trading side hustle is
PERFECT for busy 9-to-5ers who
are ready to generate an
additional income that doesn't
add to your already loaded
schedule.
You’re also perfect for options
trading side if you want access to
the same money-making tools &
"unfair advantage" in the stock
market that the rich have.
WHEN IT COMES TO HAVING MORE CONTROL OVER
YOUR PORTFOLIO AND GENERATING CONSISTENT
CASHFLOW IN A TIME-LEVERAGED WAY, THERE’S
NOTHING THAT COMPARES TO OPTIONS TRADING.
15
Trading options is the single most powerful and strategic way to have more
freedom, control, and flexibility in your life.
Whether you want to have more control over your portfolio during these times of
huge market uncertainty, start a time-leveraged side business that can *one day*
replace your full-time income, or just make a little extra money, YOU get to
decide what you want out of this. With very volatile and uncertain times ahead
for the stock market and the economy, having more skills/tools at your disposal is
more important than ever.
In short, if you want to take things to the next level, now's the time to start
learning how to trade options.
Stick with me and I’ll show you how to do it SAFELY and STRATEGICALLY. Once
you understand the basics that we covered in this starter kit, it's not a big jump
for you to start generating consistent cashflow with options, every single week.
Rose
16
thank you!
Learn more at
rosehan.com/optionstrading