Hello there, curious reader! We previously went through some basics on Options Trading, and now, your head must be spinning around thinking: “What the heck was that article all about?!”

Ever heard of options and felt like you're reading ancient hieroglyphics? Worry not, because by the end of this article, you'll be navigating the world of options like it's your favorite rom-com.

Prepare to laugh, learn, and love options! And hey, if your grandma ever wanted to trade (or just make sense of what you're always talking about), or you are too mentally challenged that your normal everyday speech goes like 'WOT OPTIONS, ME NO TRADE, ME NO MONEY', this is the perfect guide.

What on Earth is an Option?

Alright, let's take it from the top. Imagine you have the opportunity (or 'option' if you will) to buy that dreamy chocolate cake from your favorite bakery next week at today's price. Now, you're not COMMITTING to buying it, but you have the option to. (But hey, we don’t understand why don’t you just buy that cake already ffs)

That's the crux of an options contract – having the right without the obligation to buy or sell something at a fixed price. Easy peasy, right?

The Types of Options: Call and Put

There are two main characters in our options love story: Call and Put.

• Call Option: This is like saying, "Hey, I might want to BUY that cake." So with a call option, you're looking at the right to buy something at a certain price. Don't worry, no cake is actually harmed during this process!

• Put Option: Conversely, this one's like, "Hmm, I might want to SELL that cake." So, with a put option, you're holding the right to sell something at a decided price. Why you'd ever want to sell a cake, just eat it already!

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European Vacation vs American Road Trip: Types of Option Styles

Now, onto some geography with a twist! Options come in two exciting styles:

American Style

Like an all-you-can-eat buffet, you can exercise this option ANY time before its expiration. Freedom, right?

European Style

Think of this like a posh dinner reservation. You can only exercise it at a very specific time, i.e., its expiration.

Remember, just like deciding between gelato in Rome or a burger in New York, there's no better option style; it's all about what suits your trading taste buds.

Settling the Bill: Physical vs. Cash Settlement

When the party's over, and it's time to settle the bill, options have their own style:

• Physically Settled: Here, the actual asset (like our beloved cake) gets exchanged. So, if you decide to exercise your option, you get the real deal!

• Cash Settled: It's all about the moolah! Instead of getting the asset, you get the cash difference between the current price and the strike price.

The Magic Multiplier

Options have a secret weapon, the "multiplier." It determines how much of an asset an option contract controls. For most stocks, it's like shopping in bulk - 1 option often means 100 shares! But, like choosing between a family-sized pack of chips or just a single bar of chocolate, always check the multiplier size before you dive in.

Conclusion

There you have it, a whirlwind tour of options trading that hopefully felt more like a fun afternoon binge-watching your favorite show than a finance lecture (or maybe even felt like someone shouting in a mental institution because of the all-so-complicated jargon that was used).

Always remember, the world of options is vast and intriguing. While you're learning, don't hesitate to play around with trading platforms (with imaginary money, of course! We can't stop you if you wanna degen though.) to get the hang of it. Now, go forth and option away!