Prime Playbook
May 17, 2025 "Options Trading Simplified"
The No-BS Beginner's Guide to Options Trading
⚠️ Read This First:
This isn’t your typical baby’s-first-options-guide filled with confusing finance-speak and worthless definitions that don’t help you make money or avoid disaster. This is written for the person who saw someone on Reddit or TikTok post a $5k-to-$50k options gain and thought, “Damn, I want to try this.”
You’re curious. You want to make money. But you also have no idea what anything means, and worse, every guide out there just makes it worse.
We’re gonna fix that.
Chapter 1: WTF is an Option?
Let’s keep this insanely simple:
If you think a stock is going up, you usually buy a call.
If you think a stock is going down, you usually buy a put.
That’s it to start. Forget about all the garbage like “the right but not the obligation…” — we’ll come back to that later.
For now, just know:
A call makes money when the stock goes up, more when it goes up faster.
A put makes money when the stock goes down, more when it goes down faster.
You’re not buying shares. You’re renting the chance to benefit from a move. That’s what you’re doing — renting risk. Renting exposure. You don’t own the stock. You’re not marrying the trade. It’s not your baby. It’s a damn rental car — use it, then dump it.
Chapter 2: What Are You Actually Buying?
You’re buying a contract. Each contract is tied to 100 shares of the stock.
Example:
You buy
AAPL 180C exp Friday for $0.50
That means:
You’re betting Apple will go up.
You want that to happen before Friday.
You paid $0.50 (which means $50 total, because it’s $0.50 × 100 shares).
You do NOT need Apple to go to $180 to make money. You just need that option contract to increase in value. That happens when:
Apple starts moving up quickly.
There’s a lot of time left until expiration.
Volatility goes nuts.
You're not hoping to hold this to the end. You're not looking for marriage. You are dating risk, and you need to be ready to ghost it when the time is right. Too many new traders blow up because they fall in love with a play and won't let go. Don't do that.
Chapter 3: What is Expiration and Why It’s a Ticking Time Bomb
Every contract expires.
Once it does, it becomes worthless — or turns into an obligation (and we’ll explain why that can ruin your life later).
Options lose value every day. That’s called theta decay. So if you buy a call and the stock just sits there, your contract dies slowly. You can be right and still lose money if the stock doesn’t move fast enough.
So:
You need direction (up or down).
You need speed (before expiration).
Time is not your friend. Time is the quiet killer of lazy trades.
Chapter 4: Strike Price = Your Bet Level
The strike is the level you’re betting on.
If you buy a TSLA 180C, you’re betting Tesla goes up toward or beyond $180. If you buy a TSLA 160P, you’re betting Tesla goes down toward or below $160.
That strike is also what determines how risky or cheap the option is:
Far Out-Of-The-Money = cheaper, higher risk, higher reward.
At-The-Money = more expensive, more sensitive to movement.
Remember: you don’t need to hit the strike to profit — the price of the contract just needs to go up.
Chapter 5: How You Actually Make Money
You don’t need the stock to go past your strike to make money. You just need other people to want your contract more than you paid.
So if you bought the contract at $0.50 and it goes up to $1.00?
You can sell it.
You keep the profit.
That’s it.
You can make money even if the stock never hits your strike.
Do not listen to anyone who says you need your strike to go in-the-money. That’s beginner-trap bullshit.
Options pricing is about speed, momentum, and volatility — not just the finish line.
Chapter 6: How to Avoid Assignment (and Why It's Nuclear)
Here’s what no one told you when you started:
If your option is in the money at expiration, and you’re still holding it — you can get assigned.
That means:
Your call gets converted into buying 100 shares at the strike.
Your put gets converted into selling 100 shares at the strike.
You don’t get to say “nah I don’t want that.” It just happens.
Example:
You bought a TSLA 210C, it expires today, and Tesla closes at $210.50. You still own the contract.
Congratulations — now you own 100 shares of TSLA at $210. That’s $21,000.
Didn’t want that? Don’t have the cash? Too bad.
Your broker will:
Liquidate your account.
Freeze your buying power.
Margin call your ass.
Possibly lock your account or leave you stuck holding shares you didn’t want.
Assignment is not just bad — it can wreck your whole financial situation. Imagine accidentally being on the hook for tens of thousands of dollars from one "cheap" trade.
Never hold contracts to expiration if they are in the money.
Sell early. Take your win or your loss. Don’t roll the dice.
☢️ Chapter 7: What You're Not Doing
Let’s get this straight now so you don’t blow your account like the rest of Reddit:
❌ You’re not trying to get assigned
❌ You’re not holding until expiration like a lottery ticket
❌ You’re not using 80% of your account on a single trade
❌ You’re not buying random tickers because “you saw it on X”
You're here to snipe, not spray and pray.
💥 Chapter 8: Your First Trade (Done Right)
Let’s walk it:
You see SPY trending up
You like a pullback to a level
You think it can bounce 1-2 points
You buy:
SPY 590C exp Friday @ $0.35
You’re not “waiting for SPY to hit 590”
You’re looking for it to move up enough to make that $0.35 go to $0.50 or $0.80 — and you’re out.
That’s trading.
You never touched the strike.
You never went ITM.
You never even thought about expiration.
You used the option as a tool to capitalize on a short-term move.
Chapter 9: FAQs That Actually Matter (and Get Asked Every Damn Day)
"How much should I spend per trade?"
Whatever you’re okay lighting on fire and walking away from. That’s your number.
You’re renting risk, not investing in your 401(k). If you have $1,000 total to trade, you should never drop more than 5-10% on a single trade early on. That’s $50 to $100. Not $500. Definitely not the whole stack.
"Should I use a stop loss?"
Yes! But understand that options move FAST.
A 20-30% stop is usually too tight. You can get wicked out of great trades. Consider:
Mental stops.
Alerts.
Tiered exits if the trade reverses.
But always remember: Hope is not a strategy. Cut losers fast. You can always re-enter. Staying in a dead trade and praying is how you wreck your account.
"When should I sell?"
Here’s a solid beginner flow:
Take 1/3 of your position off at 30% gain.
Next trim: take off enough to cover your total cost.
Now you're riding free runners — house money.
This keeps your risk managed and your brain calmer.
"Do I need a trading plan?"
Y-E-S YES!! Every single day. If you don’t write down your trade plan before the market opens, you don’t trade.
No plan = no trade.
You need to know:
Entry price
Stop level
Profit targets
What chart level you’re using
What tickers you are watching
Otherwise you’re just gambling.
"How should I chart? What chart should I trade with?"
Keep it simple:
Start by charting key support and resistance levels on big timeframes: 4-hour, daily, and weekly. These bigger timeframes show stronger, more reliable levels that matter more to the market. Volume at these levels confirms their importance.
When you’re charting, use a consistent color system so you never have to second guess what a line means.
Example Color Code:
🟢 Call Entry
🔴 Put Entry
🔵 Price Targets
🟣 Support/Resistance Levels
🟡 Premarket Highs/LowsPick your own system — just stay consistent so your brain responds instantly.
Mark your levels (support, resistance).
Watch volume.
Add basic trend lines. Don’t complicate it.
When you trade, don’t trade on those big timeframes directly. Use the smaller intraday charts like 5-minute or 10-minute to time your entries.
How do you enter?
If the market is not strong or momentum is weak, wait for a retest of those key levels. Don’t jump in right at the break.
If the market has strong momentum, look for a break of the level with follow-through.
In both cases, always wait for the 5-minute candle to close past your level before entering. This candle close confirmation helps avoid fakeouts and traps.
You don’t need 50 indicators. You don’t need to watch 5 screens. You need to know the story the chart is telling.
Start with clean levels. Then practice drawing trend lines. Watch how price reacts.
Final Words
Trading options isn’t magic. It’s about managing risk, having a clear plan, and respecting the market. You want to stay alive long enough to get good. You want to keep losses small and learn the rhythm. You want to earn the right to start taking asymmetric bets.
Forget the “go all in and pray” bullshit. Protect your ass, cut losers fast, take profits smart, and watch those assignment traps.
Get the basics right, then build on them. That’s how you survive and eventually thrive.
Awesome
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