I totally understand this pain point before I began reading on options I was clueless, mystified but ultimately realized options are akin to trading stocks (buying low selling high) but with the added time restriction and ability to make money in any market.
Options are tricky to understand but essentially, think of it as just a piece of paper or a contract between you and the person buying it from you. It's a buy/sell market that exists on these "papers". Options trading essentially revolve around buying these papers which usually have an expiry date of between weeks to years and at what price you can buy the underlying good before the expiry date. The profit is made from the valuation of this paper going up and down based on the underlying value of what this paper represents. The paper can be contract about beef, corn, oil and share price of Apple. Just like the stock market, you want to pay cheap price for a paper and sell it when it goes high, but the beauty of options is since you don't actually trade the actual good itself, you can create a dizzying array of strategies and combinations to make money in any type of situation, but with the condition that you have to be right about what market we are in (trending up, down, sidways, volatility etc).
Writing an option is like selling a piece of paper that says the person buying your paper will have the ability to buy the stock at the price written on the paper. If the price is low and the stock price goes up, well you now have to buy X number of shares that was written on the paper at the high price to give to this guy, causing great deal of loss to you (since you sold the paper for some cash earlier).
If the stock price falls, then you could buy the shares at the low low price using the money you made from selling the paper and give it to the other guy, who most likely won't ask you to do this and just think about the time he paid you to write him a piece of paper that is now "expired" or worthless.
Options are tricky to understand but essentially, think of it as just a piece of paper or a contract between you and the person buying it from you. It's a buy/sell market that exists on these "papers". Options trading essentially revolve around buying these papers which usually have an expiry date of between weeks to years and at what price you can buy the underlying good before the expiry date. The profit is made from the valuation of this paper going up and down based on the underlying value of what this paper represents. The paper can be contract about beef, corn, oil and share price of Apple. Just like the stock market, you want to pay cheap price for a paper and sell it when it goes high, but the beauty of options is since you don't actually trade the actual good itself, you can create a dizzying array of strategies and combinations to make money in any type of situation, but with the condition that you have to be right about what market we are in (trending up, down, sidways, volatility etc).
Writing an option is like selling a piece of paper that says the person buying your paper will have the ability to buy the stock at the price written on the paper. If the price is low and the stock price goes up, well you now have to buy X number of shares that was written on the paper at the high price to give to this guy, causing great deal of loss to you (since you sold the paper for some cash earlier).
If the stock price falls, then you could buy the shares at the low low price using the money you made from selling the paper and give it to the other guy, who most likely won't ask you to do this and just think about the time he paid you to write him a piece of paper that is now "expired" or worthless.