Getting Started with Options Trading: Learning Put and Call Strategies

When you’re first learning how to start trading options, understanding the mechanics of puts and calls is essential. Recently, new options contracts became available for major companies, and by examining real examples, you can grasp the fundamental strategies that professional traders use. This guide walks you through the core concepts using actual trading scenarios.

Understanding Put Options: Your First Steps in Options Trading

If you’re considering how to start trading with a lower initial commitment, selling put options might be your entry point. Here’s how it works: a put option at a $35 strike price might be quoted at 4 cents. When you sell-to-open this put, you’re essentially agreeing to purchase shares at that strike price if the contract gets exercised. The benefit? You collect the premium upfront, reducing your actual cost basis.

For example, if a stock trades at $35.70 today, selling that $35 put means you’d acquire shares at an effective cost of $34.96 after collecting the premium—a meaningful discount. Since the strike sits approximately 2% below current price levels, there’s roughly a 61% probability the contract expires worthless, meaning you keep the premium without ever buying shares. This represents what traders call YieldBoost—in this case, about 0.83% annualized return on your committed capital.

The Call Option Strategy: Building Your Trading Skills

Once you understand puts, learning how to start trading calls opens new opportunities. A call option lets you commit to selling shares at a higher price in exchange for upfront premium. For instance, a $37 call on that same stock might trade at 9 cents.

Here’s a practical scenario: You buy 100 shares at $35.70, then sell-to-open that $37 call as a “covered call.” You immediately collect 9 cents per share as premium. If the stock gets called away at expiration, your total return would be 3.89%—the 3.8% price difference plus the premium collected. Should the contract expire worthless (52% probability given current conditions), you retain both your shares and the premium, capturing an additional 1.84% annualized return.

Managing Implied Volatility: A Critical Skill for New Traders

As you start trading options, paying attention to implied volatility becomes increasingly important. This metric reveals what the market expects in terms of price swings. In these examples, put options showed 47% implied volatility while calls showed 44%, compared to actual 12-month trailing volatility of 43%. Understanding this difference helps you identify whether options are priced attractively or expensively—knowledge that separates successful traders from those who struggle.

Taking Your First Steps: Building Confidence

Before you fully commit to how to start trading options, remember that both strategies involve distinct risk-reward profiles. Put selling works best for investors wanting to build positions at lower prices. Covered calls suit those already holding shares who want to generate additional income. The key to starting successfully is understanding that every trade involves probabilities, premiums, and defined risk parameters.

Track the Greeks—the mathematical measures of how options respond to price changes—and review actual historical price action over 12-month periods to see where key strike prices sit relative to support and resistance levels. This combination of quantitative analysis and technical context forms the foundation of professional options trading education.

Your journey in learning how to start trading options should progress methodically: master the terminology, study real examples with actual numbers, understand the probability distributions, then execute small trades to gain real experience.