Options Education
SOPHIE Daddy Quant Blog
Options 101
Understand the key scenarios where options can be an effective trading and investment tool.
Study Guide (click to select)
Video Tutorial
Visual Guide
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Primary Use Cases
Hedging Risk
Protect existing positions from adverse price movements. Buy puts to hedge long stock positions or calls to hedge short positions.
Speculation with Leverage
Control a larger position with less capital. Options provide leveraged exposure to price movements with defined risk.
Income Generation
Sell covered calls or cash-secured puts to generate premium income on existing holdings or available cash.
Volatility Betting
Trade on your expectations of volatility changes rather than just price direction. Profit from volatility expansion or contraction.
Capital Efficiency
Achieve similar exposure to stocks with less capital, freeing up funds for other investments or risk management.
When NOT to Use Options
⚠️ Important Warnings
• As a "get rich quick" scheme:Options require skill and knowledge to use effectively.
• Without understanding the Greeks:Don't trade what you don't understand.
• When you can't afford the maximum loss:Options can expire worthless.
• Without a clear strategy:Random option buying often leads to losses.
• In illiquid options:Wide bid-ask spreads can hurt profitability.
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