What's Options Trading? It's how a 13 YEAR OLD MADE $78,000...

You've probably heard stories about day traders and how Investors make money within seconds. With options trading, individuals can make money whether a stock is doing well or if it tanks.

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What's Options Trading?

Options trading involves the buyer the right but not obligation to buy or sell contracts at a specific price for a certain amount of time (expiration). One contract is worth 100 shares at a discounted price. For example, buying 100 shares of Netflix at $565 per share for $56,500 (100x$565). I know, that's expensive right? But one contract (options) would cost me $1,225. Traders can withdrawal at any moment to collect profits. Investors do not have ownership with this type of investing. Learn more about stocks here.

Here's a Tip: Remain patient and be calm if you're losing funds. You have enough time for the investment to rise again.

What's a CALL option?

A call option gives the buyer the right to purchase a stock at a specific price by a specific expiration date. Investors place call options if they predict the stock to rise. Like the Netflix example above, we're predicting the stock to rise from $565 to $575. So if you think the stock will increase during a set amount of time then place a call option and receive unlimited amount of profits. Your option can increase $100 for every dollar in the stock price. So if the stock price is $575 and then increases to $576 you're looking up to $100 profit.

Helpful Hint: Place a call option when you notice the stock briefly drops after analyzing it's position.

What's a PUT option?

Also known as "shorting a company". A put option gives the buyer the right to sell shares at a specific amount of time for a specific price. In other words, you the investor or day trader is predicting a stock to fall. Yes, you can make money as the market declines. For instance, famous investor Wall Street Trapper predicted Tesla's stock to drop while watching a interview of CEO Elon Musk smoking marijuana and sipping whiskey. Trapper predicted investors would disagree with Musk's activities and he placed a put option which resulted in $2,500 profit within minutes.

Billionaire entrepreneur and Dallas Mavericks team owner Mark Cuban offered his views on shorting companies. "I short stocks. I make money shorting stocks. I short stocks because I’m a firm believer that in a universe of more than 10k public companies, not all of them are well operated." So basically, what goes up must come down and opportunities can be made.

Helpful Tip: Place a put option when the stock reaches a new high or if you hear recent disappointing information about the company. Proceed with caution!

Expiration Date

Every option has an expiration date which means you have a certain amount of time to claim your profits. Whether you choose call or put options, the max you can hold onto a contract is 2 years. Expiration dates also fall on a Friday for all options. The closer it gets to the expiration date the less profit you make if it doesn't reach the price target.

Helpful suggestion: Long term options. Pick an expiration date 4 weeks or later for an expensive investment (option) and longer date for a cheaper investment. Timing is everything! You wouldn't want your expiration date to arrive early while you're finally making money with the option. Once you like your profits, withdrawal and run anytime.

High Risk or Low Risk?

Some say options are too risky or experienced investors may say it's the safest. Truth is, it all depends. DON'T treat options like gambling. If you pick random stocks like I did then you'll lose money. That's risky. If you understand the stock's movement, develop relationships with them, understand time decay, and pay attention to company news then you can minimize risks. With developing relationships, analyze and know the stock's highs and lows from the past month.

13 Year old makes $78,000

He goes by Truth Jones on his social media platforms and this kid is going to be a legend! Tesla had a great year last year and often times seen $100 daily stock gains. Jones initial investment was $2,200 and he made $78,000 on a call option with Tesla (predicting to increase).

Helpful Tip: You can buy multiple contracts for a single option at a time to maximize profits.

Bottom Line

Options Trading is appealing to some investors and is considered less risky because you can recoup profits at any given time. Keep in mind placing these trades doesn't represent ownership in the company. You can make hundreds or thousands of dollars with seconds or minutes but can also lose the same way. Learn the fundamentals and analyze the movements of each stock for weeks or months before placing them. Ohh one more thing. DON'T LOSE MONEY!