I Still have no basic understanding on options and none of the videos I watched are really clicking. Got a call option on PLUG that expire in Sept.
So the basic is u either betting on a stock to rise (call) or fall (put).
The only reason why u should care about the strike price is because that determines the price per contract. The larger the margin of the price between the current stock price and the strike price, the cheaper the contracts cost.
For example, lets say Ford is trading at $3. If u put a call in at a strike price for $6 three months from now the contracts will cost less then a lower strike price ($4 or $5).
Where as if u buy a call at a strike price of $4, they will cost more due to the margin of the two numbers being low. Why is that? Because Ford will most like hit $4 then $6 in 3 months. But again, we dont care if it reaches $4 or $6. We only care that it goes up in price from when we bought it. $4 strike price will be more volatile then the $6 one. Meaning u can gain and lose alot more using the $4 strike then the $6.
So lets say u bought the $6 strike price at .75 per contract using a call option. The stock (Ford) then goes from $3 to $3.88. That .88 raise will raise the price per contract that u paid. So lets say your contract shares went from .75 to .81 off of the stock going up to $3.88. U are now in a profit and can sell those contracts or keep them to see if the stock will go higher.
And its all the same for puts. I usally buy options with an expiration date of no more then 3 months because i plan on trading them in a week.
You can play it safe and buy long term options. Hell, they even have 1 year ones. Just remember the strike price has jack shyt to do with if u profit or not. Its only there to determine the price of contracts. Also, if u use robinhood, they are called CALL prices instead of strikes.