START WITH THE RISK
Investing Basics
Know each dollar’s job before you learn products. This path starts with position size, contract obligations, and trading costs—so return figures don’t pull you in alone.
Understand the unit
Per-share quotes, contract multipliers, and contract count set your true dollar risk.
Understand the trade-off
Behind every Premium there is an obligation, a cap, or principal risk.
Understand the cost
Put spreads, fees, and exit costs back into the numbers.
One Call is not one share
From quote units to shares and stock notional.
Read ↗Covered Call is not free rent
What you give up when you collect Premium.
Read ↗How Bid-Ask Spreads eat Premium
Clear real execution cost before annualising.
Read ↗8% annualised ≠ 8% every year
Separate one-time income, annualised display, and total return.
Read ↗Build a decision card first
For every capital allocation, write purpose, use date, maximum loss you can bear, and liquidity needs. A down payment needed in three years and retirement money needed in twenty should not share the same volatility assumption.
Only then check the product: what it holds, how it charges, FX or tax effects, and how you exit in a bad case. If the only explanation is “higher return,” research is not finished.
Suggested reading order
- Use contract multipliers to see the real dollars behind one option.
- Use Covered Call to understand Premium versus upside rights.
- Use Bid-Ask Spread to estimate round-trip cost—don’t rely on mid only.
- Only then annualise Premium and check it against the whole portfolio.