Disclaimers: I'm still learning. I can be wrong. This is not financial or legal advice, just me explaining what I've learned thus far. YMMV, but I'm not responsible for anything this knowledge is used for.

All numbers are arbitrary, but somewhat realistic examples.

It's confusing. I know. Tis life. I tried my best to explain it accurately. Concise is not something I do unless forced.

So I've been learning stock trading basics for a while (terms, patterns, concepts, etc.), and I've been practicing along the way. Unfortunately, my program that I use resets sometimes (randomly) so I can't keep a running total of money lost/earned in this practice. Here is a picture of the program:

Currently, I've lost 17% of my (paper, fake, monopoly) money, but this is a long play and I expected something different to happen (the huge dip in the DJIA was unexpected and threw me off). I should start making money Monday, Tuesday, or Wednesday of next week on this setup.

To kind of help you read the above image, the top left is my totals. They give you $200,000 of paper money to invest, but $100,000 is for one type of trading and the other $100,000 is for the other type of trading. So it's more like I have $100,000 since I only trade with one half of it. Net Liq & Day Trades is what I use, and I don't "do" Day Trading. Right now anyway.

I'm keeping an eye on Abbott and Tesla for reasons. I didn't straight up buy stock in either company. I purchased a Put for Abbott and a Call for Tesla. This means I make money if Tesla goes up and if Abbott goes down.

Unfortunately, the opposite happened, so I lost like 30%, but it's reversing now.

The bottom row of charts is the Weekly charts for Abbott, Tesla, & the Dow Jones Industrial Average (average of the an entire market's performance, not THE market, but A market). The top row is the daily chart for those things.

But yeah. Still learning.

I was really bummed out that the program reset on me. I had doubled my money on a stock going up $1 by selling Puts (literally, I had $100,000 worth of Puts and after I sold them, I had $200,000+). It was very lucky that the stock moved so strongly, but I knew it would go up.

Options are Calls & Puts (There may be more, but I've only learned about these). The easiest analogy I've found to understand them is thus:

• Calls are Coupons on a stock price. i.e. If I buy a call for TSLA (Tesla) at $250, I have a coupon giving me the right to buy TSLA's stock at $250, no matter what the price currently is.
  
• Puts are Price Guarantees on a stock price. i.e. If I buy a put for TSLA at $250, I have a price guarantee that I can sell TSLA's stock at $250, no matter what the price currently is.
  

So Calls are for buying stock, and Puts are for selling stock. If you are wondering how they make money doing that, if I buy a Call for TSLA at $250, but their current Stock Price is $255.50, I will pay $5.50 per Call. Then I will pay $250 per share of stock. So they still get the full price, at the time I purchased the Call, of the stock.

However, Calls & Puts can expire. Just like normal Coupons and Price Guarantees. If I buy either of them, but I never buy or sell the stock, I lost money, but not a lot of money (what is $5.50?) That's one way the companies themselves make money on Options.

What a Call & Put give you is time. If you think a stock is going up, you can buy a Call (Coupon) to buy that stock at, say $250, but then wait until it hits $300 to buy it at $250. So you know for a fact you are going to profit. Or you can let the Call expire because the stock dropped to $200 and you were wrong about it going up. So buying it at $250 would be stupid as it's currently $200.

Options are just that. Options. They buy you time to think about whether you want to buy/sell the stock or not.

Just for reference, here is how you make money buying & selling options (Calls & Puts):

• Buy Calls = You make money if the stock goes up - Because you have a coupon that says you can buy the stock at $250, if the stock goes to $300, you buy it cheaper than it currently is, then sell it for a profit.
  
• Buy Puts = You make money if the stock goes down - Because you have a price guarantee that says you can sell the stock at $250, if the stock goes to $200, you can sell it for more than it currently is.
  
• Sell Calls = You make money if the stock goes down - I'm still trying to understand why and how this works. It's complicated because you are selling someone else or a company the right to sell stock to you at $250 or wtv.
  
• Sell Puts = You make money if the stock goes up - I'm still trying to understand why and how this works. It's complicated because you are selling someone else or a company the right to buy stock from you at $250 or wtv.
  

What each scenario does is it basically decides how much money you can profit or lose in the trade. i.e. if I sell a Put, my maximum profit is capped at 100% (double my money), but my maximum loss is infinite (I lose all of my money).

However, the reason you would want to sell a Put is because you sold something. You immediately get paid for it, but the amount is small. And it's very likely you will profit, and very unlikely you will lose all your money.

These are the things to consider when doing a trade with options:

1. Profit potential (i.e. max profit is 100%, infinite, or what-have-you)
   
2. Loss Potential (i.e. 100% AKA infinite, or what-have-you)
   
3. Probability of both of those happening (i.e. odds of profit vs odds of loss)
   

Each of those choices above (Buy Calls, Buy Puts, Sell Calls & Sell Puts) have different values for how much you can earn/lose and what the odds of each thing happening are.

That's generally what I've learned so far. This is just practice mode, I'll give an update when I move to real money mode.