Options trading: The big guide to option trading 2026

Hardly any other area of the financial world is as flexible and lucrative as the Trade options. However, the seemingly high complexity and risks deter many interested traders. Together with professional options trader Alexander Eichhorn, we have therefore developed this Guide to the ideal start in options trading created!

Trading options: Basics

Among financial products, options are considered to be difficult professional tools to master. Let's compare it, for example, with passive asset accumulation via Share savings plan, options transactions are certainly much more complex, but they are not rocket science! 

Any beginner with a little interest and time can learn to trade options. The basics are quickly explained: 

An option is a commercial contract between two partners, the buyer and the seller. Both have their own rights and obligations.  

1. Buyer of an option: He acquires an option and must pay money for it. (the so-called “premium”) pay. He uses it to buy the Right to execute the trade specified in the option. However, he is not obliged to do so! If the trade is unfavorable for him, he will refrain from doing so. The option contract then expires. 
2. The Seller: He assures the agreed trade and waits to see what the other side decides (because of this wait-and-see attitude, he is also called a “standstill holder”). He himself does not have the right to vote and must conduct business on request - even if this is unfavorable for him. In return, however, he receives the premium as compensation. 

The two sides of options trading are therefore very different. The The buyer of such a contract is in a privileged position, as he can decide whether to execute the trade or let it lapse. However, he must also pay a fee for this right. 

The Seller, on the other hand, is (apparently) at a disadvantageHe can only wait for the buyer's decision and must execute the trade on request. However, he receives the premium in any case, so this position can also be very lucrative!

This is how an option is structured

Next, we want to Option view yourself. What is included and how is it structured?

• We trade options on special options exchanges such as the CBOE in Chicago. These are standardized financial products. Traders can therefore be sure that these contracts work as agreed - a big difference in comparison Options vs. warrants!
• All Parameters of such an option contract are determined upon conclusion:
  • Term (when will be traded?)
  • The asset to be traded, also known as the “underlying” (what is being traded?) 
  • The quantity of the good (how much is traded?)
  • Whether the underlying asset is to be bought or sold (how is it traded?)
  • And at what price the trade should take place. This is referred to as the “strike”.

The many features of a contract make this area so flexible and attractive! For example, we can Options on thousands of different underlyings act. These include: 

• Stocks
• Raw materials
• Foreign exchange
• Indexes
• Cryptocurrencies
• Interest rates 
• and much more

The other parameters, such as the term and the question of whether to buy or sell an underlying asset, also offer exciting possibilities. And as if that wasn't enough, we can also combine several contracts to implement complex strategies. 

Why should I trade options? 

No other financial vehicle offers as many strategic opportunities as options. We can use them in any market situation and for any purpose. However, there is always one of two possible objectives behind their use: 

1. hedge against price fluctuations: The guaranteed price in the option contract creates security for the buyer of an option. Even if prices develop unfavorably, the purchased contract gives the buyer the opportunity to execute the trade at the agreed value. This “hedging” is important for investors (for example, to protect their own Hedging shares) and producers (e.g. farmers who want to secure a price for their harvest). 
2. To make a profit: Both buyers and sellers of the contracts can generate income. Profits are generated either through price speculation or from the premiums we receive for selling options. We can also combine both variants: Various strategies combine premium income and price speculation. 

Risks

As with all financial transactions, the same applies to options trading: High chances of winning also go hand in hand with high risks! Options can develop unfavorably for both the buyer and the seller. 

The risks of an individual contract differ depending on whether you are a buyer or a seller: 

• The buyer of an option can decide whether he wants to execute the trade. In the event of an unfavorable price development, he will refrain from executing the trade and must book the premium paid as a loss. His risk is therefore limited to a maximum of this amount. 
• The seller is obliged to execute the trade if the counterparty so wishes. His risk is therefore significantly higher: some contracts can generate unlimited losses!

The Risk of suffering catastrophic losses, must be taken seriously! Fortunately, you can protect yourself against such risks. Experienced traders trade several options that interact strategically and limit or completely avoid losses. A good risk and Money management is therefore indispensable!

In addition to the risk of catastrophic losses due to a lack of hedging, there is also the threat of long-term damage. When trading options, setbacks are inevitable - a completely normal process. However, to be successful in the long term, you need to achieve more positive results than negative ones. 

We therefore strongly recommend that options initially on a CapTrader Paper Trading Account to act. Here you can test your strategies in a realistic environment with play money. There is also a Trading Journal useful: It helps you to record and analyze successes and failures and to optimize your approach. 

Furthermore, the Margin trading can be the undoing of careless traders. Traders borrow capital from their broker, to be able to use larger amounts. This can increase profits, but also losses. This makes it possible to lose more than the capital invested. 

Option types in detail

A distinction is made between Four basic types of options, depending on whether you act as seller or buyer and whether the agreed trade is a purchase or sale of goods. 

If you buy an option, you take a “long” position. The seller of a contract, on the other hand, goes short. 

The actual object of the trade can also take two forms: 

• A call is the right to buy a good
• A put is the right to sell a good. 

This results in four possibilities: 

1. long call

You acquire the right to buy an underlying asset in the future. If the price at the agreed time is not advantageous for you, you can waive execution. In return for this advantage, you pay a fee in the form of the option premium.

With this forward transaction, you benefit from a rising price of the underlying asset: in this case, you can exercise your right and buy at the predetermined, lower price. 

You could then immediately sell the cheaply purchased asset at the higher, current price (“spot price”) on the stock exchange - the difference, minus the premium paid, represents your profit. This results in the following formula: 

Profit = spot price - strike - premium paid

Basically, your possible loss as an option buyer is limited to the option premium paid. In the worst case scenario, the price of the underlying asset does not rise sufficiently and you let your contract expire worthless. 

The The potential profit on a long call is unlimited, as the underlying can theoretically rise indefinitely. 

2. long put

With this contract you acquire the right to sell an underlying asset. Here, too, the term and the price (strike price) at which trading takes place are defined in advance. As an option buyer, you must also pay the option premium. 

With such a contract, you are betting on a falling price. An ideal case occurs when the price of the underlying asset falls below the value agreed in the option contract (minus the cost of the option premium). You can now buy the Sell underlying asset at higher price, that you have secured with the option. 

However, if the price does not fall below the agreed strike, you will achieve a better price on the stock exchange. In this case, it is not worth exercising the option (at the lower strike price). You let the contract expire and have to book the premium paid as a loss. 

3. short call

A other options trader would like acquire the right, an underlying asset at a predetermined price buy. You act as the seller of this option and guarantee the buyer this right. In return, you receive an option premium. 

The other party will exercise if the price of the underlying asset on the stock exchange is higher than agreed in the option. In this case, you have no right of choice and must assign the underlying asset to the buyer at the lower price. 

The higher the share price rises, the greater your Loss - theoretically unlimited! However, you may keep the option premium in any case. 

The maximum loss is therefore the same: 

Underlying price - option strike price + option premium 

However, if the price remains below the agreed strike price, the option expires worthless: the counterparty would have no advantage from demanding exercise. This is because buying on the stock exchange would be cheaper in this case. You can book the premium received as a profit. 

4. short put

A Options trader would like to acquire the right to use a Underlying at an agreed price to Sell. You secure this right for him (you sell an option) and thereby undertake to buy the underlying asset. In return, you receive an option premium.

If the price remains above the specified strike (minus the premium), your contractual partner will not exercise his right to sell - he could achieve a better price on the stock exchange. In this case, the option expires worthless and you can book the premium as a profit. 

However, if the current price falls below the strike (minus the premium paid), the option is exercised: you must now buy the underlying asset at the agreed price. A bad deal, as the asset is currently worth less on the stock exchange! However, you can keep the premium as usual. 

The difficulty of price determination

With options, you trade the respective underlying asset in the future. If its price rises or falls, the value of the futures contract also changes - but not exactly the same! 

For example, if you trade an option on a share and the price of the security rises by 3 percent, the value of the contract could rise by 6, 10 or even 50 percent! This is because numerous other factors are included in the pricing. This makes the exact determination of value a complicated field. 

For the calculationi have several formulas named with Greek letters. One speaks of the so-called "Option Greeks". 

• The delta expresses what happens to the price of a contract if the price of the underlying rises by 1 US dollar. It can assume a value of -1 to 1 and is always positive for calls and negative for puts. 

• The gamma refers to the delta and indicates how this changes over time. Here too, the benchmark is a change in the price of the underlying by 1 US dollar. The gamma increases the closer the option is “at the money” (= at the positive point for the buyer). 

• With the Vega, the Volatility into the price calculation. The higher the implied volatility of the underlying asset, the more expensive the contract becomes - and vice versa. In addition, the vega decreases over the lifetime of the futures contract. 

You can find out more about volatility and the special indices in our articles on the topic VIX options and the VVIX.

• An option loses value over time (so-called time value loss) as its end date approaches. The Greek letter theta expresses the rate of change per day. This is always negative for the option buyer, as time progresses inexorably. 

“The Greeks” seem complicated and daunting to many beginners. In fact, however, you only need to understand their exact calculation to some extent - it is enough if you are aware of their significance for price formation. 

Trading options: how and where?

If you want to trade futures contracts, you need a suitable broker. While there is a very wide choice when simply buying shares, it is essential to have a Options brokers like CapTrader here. The number of possible providers is much smaller here! 

Once you have found a service provider, all you have to do is select the appropriate contract on a trading venue and execute the transaction. Your first option trade is already concluded - but of course there is much more to it in detail. We explain below what you should look out for. 

Choosing the right broker

The selection of options brokers is manageable; however, there are massive differences in the quality, range and costs of the individual providers! Before you decide on a broker, you should consider the following factors: 

• Costs. Trading options is not a cheap affair with most brokers! You often have to accept comparatively high fees: Futures contracts usually cost twice as much as a “simple transaction” such as buying shares. A price comparison between providers is therefore highly recommended.

With executions starting at 2.00 euros, CapTrader is one of the cheapest providers if you want to trade options in Europe! You can also trade at the best prices on the options exchanges in Japan, USA, Canada, UK, Switzerland and many more. 

• Selection. For effective trading, you need access to several trading centers. This is the only way to conclude various transactions at favorable conditions. The higher liquidity on some markets is also an important factor. 

With Germany, USA, Switzerland, France, Belgium, Sweden, Japan, Korea, Canada, Hong Kong and many more, CapTrader offers you a huge selection of trading centers at attractive conditions!

• Trading software. Special programs are recommended for trading options, as they provide a better overview and additional functions. 

CapTrader offers you several professional tools. With OptionTrader we have even provided a trading program specifically for trading futures contracts. Of course, it is completely free to use!

Once you have found a suitable broker, you need to make a Apply for an options account. 

Once the registration process is complete, you can start option trading. The actual trading works in a similar way to other assets such as shares or ETFs. 

Due to the many variables, however, you are faced with a large number of offers. The right software helps you to keep track of things!

Options trading in practice: sensible strategies for getting started

Options trading offers extensive strategic opportunities. So extensive that newcomers quickly feel hopelessly lost! But don't worry: There are procedures that are both lucrative and easy to use. 

We have put together some beginner-friendly option strategies for you below. 

Hedging with a long put 

Options are an excellent way of against price slumps, crises and crashes. By buying a simple long put, for example, we can secure a price for the shares in our portfolio. This works as follows: 

• We buy a long put on a share or share index and thereby obtain the right to sell it at the agreed price. 
• We have to pay a fee for this privilege in the form of the option premium. 
• If share prices fall, we exercise our long put and sell the securities at the agreed, higher price. 
• We can now buy the share again cheaply on the stock market or be satisfied with the successful sale. 
• However, if the price does not fall, we do not exercise our option. In this case, we have to recognize the premium paid as a loss. 

An important advantage of this strategy: We do not have to own the respective securities in order to trade a long put! If the shares are not in your securities account, they are simply bought cheaply on the stock exchange when the option is exercised before being sold to the counterparty to the option transaction at a higher price. 

Hedging via a long put is therefore suitable for both share owners and people who expect share prices to fall and want to profit from this. 

Sell with additional return via covered call

Through a Short Call we guarantee an options trader the right to buy an asset from us. Such a contract is ideal if we want to sell a share from our portfolio and make additional profits. The strategy works as follows: 

• We trade a short call on a share in our possession that we want to sell. The strike should be above the current price. 
• The option premium for the sale of such a contract is credited to us immediately.  
• If the share price rises and exceeds the strike price agreed in our contract, the option is exercised. We must now sell our shares to the counterparty 
• We receive slightly less profit than on the stock market, but have earned the option premium. 
• If the price remains below our strike, the option expires worthless and the premium forms our profit. We can then repeat the process.  

Also Here you do not necessarily have to have the shares in your portfolio. It is possible to set such an option via “Cash Settlement” to be executed. You must then send the corresponding capital to the buyer instead of the securities. 

However, due to the high risk (the price of the shares could theoretically multiply and cause you a huge loss), such “naked calls” are not advisable.  

Shopping with profit thanks to Cash Secured Put

The Cash Secured Put is an option strategy that is not only popular with beginners. It is suitable for people who actually want to acquire a share, ETF or other asset. Instead of simply executing this purchase directly, we trade short put options and can thus make an additional profit. 

This is how it works: 

• We sell a put option for our desired share at a strike price that is reasonable for us. This means that we undertake to buy the security at this price if our contractual partner so wishes. 
• We receive a premium for the sale of an option, which is credited to us immediately. 
• If the share price falls below the strike price agreed in our contract, the counterparty will exercise the option. We must now buy the shares. 
• Since we wanted to own the securities anyway and the strike was a fair value for us, we did not suffer any serious loss. 
• However, if the share price remains above our strike, the option will expire worthless. We can book the premium received as a profit and repeat the process. 

Regardless of the outcome of the contract (desired share received or not) we have earned additional cash through the premium. In the event of a worthless expiry, we can now repeat the process and thus theoretically generate unlimited additional income. 

The two strategies mentioned, Covered Call and Cash Secured Put, can be executed alternately again and again. This can result in a continuous cash flow. In this case, due to the constant repetition, it is referred to as the wheel strategy. 

Our tip for beginners: The wheel strategy is not without danger, but is considered comparatively low-risk. A good way for beginners to further reduce the risks is the Optionshandel mit ETF instead of shares. 

Exchange traded funds consist of several securities, so that the risk of a total loss or strong fluctuations can be reduced. However, ETFs with high volatility are also available, for example on AI shares or Cannabis Aktien available!

Exercise of an option 

If you have bought an option, you have the right to carry out the agreed transaction. But How does this process work in practice? There are a few points to note here! 

• First of all, you should bear in mind that options “in the money” (in the profit zone) are automatically exercised on the respective expiry date - unless your broker has given you instructions to the contrary! This makes perfect economic sense, but may not fit in with your current strategy. 

• You should therefore submit your plans to the broker in good time. If you want to extend (“roll over”) or close a contract, the deadlines of the respective provider apply. These in turn depend on the chosen trading venue. CapTrader customers can find the Dates in this list. 

In principle, you can execute all types of long trades, including those that are in the loss zone (“out-of-the-money”). Such a transaction is associated with a loss and therefore does not initially make sense. However, the option is open to you. 

However, the situation is completely different if you take a short position: As a writer, you have no influence on the exercise - the decision lies with the buyer! The time of exercise is also important. There are three different types of contracts: 

American vs. European vs. Bermuda exercise

When the exercise takes place is very important for traders! Timing affects your strategic options, costs, choices and more. There are three types available to you: 

• European exercise: The option runs until the expiry date and can then be exercised by the buyer - or not. 
• American exercise: The American variant can be exercised at any time. The buyer does not have to wait until the expiry date. 
• Bermuda exercise: There are several expiry dates on which the buyer can request the exercise. If he misses a deadline, he must wait until the next one. 

The different exercise types are not only strategically important, but also influence your costs. The American form offers clear advantages for the buyer. In return, the buyer must also pay somewhat higher premiums so that the writer is rewarded for the risk. 

Example: Practical implementation in the Trader Workstation

The Trader Workstation (TWS) is an extremely powerful trading program that offers professional traders the right working environment, but is also easy to use for beginners. CapTrader customers receive free access to a range of professional tools, including the TWS.  

The Exercising an option in the Trader Workstation is very simple:

• Click on the Trade" item in the menu bar. 
• In the menu that now appears, select "Exercise of options" off. 
• Your current contracts with all important data are displayed in the new window.
• To close, click on “Select” on the right. 
• A drop-down menu offers you the option of executing American options with “Exercise early”.

TWS then transmits your exercise request to your broker. The However, execution only takes place if your option is also in the money, as this only then makes economic sense. In addition, the trading hours and deadlines of the stock exchange must be taken into account, so that delays may occur in practice.  

Would you like the Contract out of the money, i.e. close with a loss, a further step is required. To do this, click with the right mouse button on the desired option and select the item "finalize". 

A warning message will appear informing you of the consequences of this step. 

Conclusion: Options trading - not just for professionals!

Options are contracts between two trading partners. The object of the trade, date and price are specified in this contract. Both parties have different rights and obligations: The buyer may decide whether he wishes to carry out the agreed trade. 

The seller (writer) must follow this decision. In return, however, he receives a fee (premium) from the buyer. 

As the content of the transaction can be both the purchase and sale of an asset, there are extensive possibilities. However, due to the high risks of incorrect use, beginners should limit themselves to simple, rather low-risk strategies. 

For example, hedging with long puts or the “wheel strategy”, consisting of alternating covered calls and cash-secured puts, can be useful. 

No matter which approach you choose: You need a suitable options broker! Unfortunately, options contracts are only available from a few providers, such as CapTrader. 

In addition, you should always start trading options on a Paper Trading Account test. Only if you achieve good results here in the long term is the use of real capital conceivable. 

With our tips, even beginners can quickly achieve their first successes. Trading options is therefore by no means just for proven financial professionals! Once the foundations have been laid, other exciting areas await, such as the Delta hedging, to you!