How To Trade Options: Basics for Beginners
Options were once traded in unregulated, face-to-face, over-the-counter transactions. That all changed in 1973 with the formation of the Chicago Board of Exchange.
Today, options represent a very liquid, well-developed segment of the financial derivatives market. In other words, options have become a very attractive investment.
In 2025, the U.S. options industry saw its sixth consecutive record-breaking year, with total volume topping 15.2 billion contracts, which was a 26% increase over 2024.
How Options Contracts Work
To understand the essence of buying and selling this financial derivative, it may help to consider an everyday-life example that is more or less familiar to everyone: selling real estate. In this contractual relationship, the buyer pays a down payment, which gives him the right but not the obligation to buy the real estate within a certain period at the agreed price.
If the buyer doesn’t fulfill the contract with the seller by the agreed date, the seller retains the down payment without any obligation to return it.
In our trading scenario, the down payment is the premium on the call option, the deadline by which the buyer has the right to buy the property is the maturity of the option, and the price of the property is the strike price.
The only difference between the down payment and the option premium is that the down payment is part of the agreed-upon property price, while the option premium isn’t part of the strike price.
Getting Started With Options Trading
The next section offers step-by-step advice on precisely how to approach options trading. We’ve divided our overview into two main steps.
Step 1: Learn
Before you begin buying and selling options, it is necessary to study this financial instrument carefully. No matter how appealing trading may seem, it can lead to losses (albeit limited) for those who take it lightly.
Trading in this financial instrument should be based not only on expectations regarding price movements of the underlying asset but also on a very detailed analysis of the historical price movements.
Throughout 2025, the rise of Zero Days to Expiration (0DTE) options changed the landscape, as these now account for approximately 43% to 59% of daily volumes in major indices like the SPX.
Step 2: Choose
Whether you decide to have a broker trade options on your behalf or to do it yourself via an online trading platform, you have to do your homework and choose wisely. Here are the features you should pay attention to when choosing a broker or trading platform:
Reputation
Look for companies that have built up a strong reputation for providing top-notch services. See if they’ve won any awards over the past year or two and how long they’ve been in business. Seek out customer reviews and read as many as you can.
Pricing
You’ll be charged a commission for every options trade you make. Don’t settle for a company that charges too much.
Also, don’t forget to examine additional fees that you may have to pay, such as account maintenance charges or broker-assisted trading fees, which averaged roughly $0.07 to $0.94 depending on the product type in late 2025.
Security
Trading online comes with unique risks, like having your money stolen by a hacker. You shouldn’t entrust your funds to any company that doesn’t have the latest security measures in place.
Speed
In 2026, the industry is moving toward extended trading hours, with sessions running nearly 23x5. You want to conclude contracts quickly, especially as liquidity patterns evolve outside traditional market hours.
Customer Service
Customer service may not be as high on our list of priorities as some of the other factors we’ve mentioned, but the odds are that sooner or later, you will encounter an issue that you can’t resolve on your own. That’s when you will learn that quick, accurate responses from knowledgeable representatives are of vital importance.
Ease of Use
Choosing a trading platform is tough because there are many competitors on the internet, each designed with particular kinds of users in mind. Before you start reviewing trading and analysis tools, set aside a few minutes to assess whether the platform you’re considering is user-friendly.
Options trading is hard enough without the daily headache of struggling with a complicated user interface.
FAQ
How much money do you need to trade options?
This is a difficult question because the money you’ll need depends on the type of option you plan to trade. While you could start with a small amount, most serious traders historically suggested $5,000.
However, as of 2026, there is renewed regulatory momentum to reform the Pattern Day Trader (PDT) rule, which could soon allow smaller accounts (under $25,000) to trade more actively.
Are options gambling?
Investing involves risk and trading with options can be viewed as some sort of financial gambling, seeing as you’re “betting” on a financial outcome. Finance experts prefer to say they are “speculating.”
Whether you’re a novice trader or a seasoned investor, your loss can be a small amount, equal, for example, to the premium when an options trade moves in an adverse direction and appears on the verge of expiring out of the money. It can also be devastating: You stand to lose the entire initial investment or more, depending on the trading strategy used.
Can options trading make you rich?
Simply put, yes. Trading these financial instruments can make you rich. It’s hard work, however. You’ll need an exceptional amount of skill and knowledge, high risk tolerance, and solid investment advice on the underlying stock or whatever the underlying security or asset the option is written on. Even though options are low-risk investment products, mishandling them can still lead to losses.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.
