Wheel 101 · Part 5
Options terms to know and beginner mistakes
Words to know
- Strike
- The price in the contract ($50 in our example).
- Expiration
- The date the contract ends.
- Premium
- The cash you get paid upfront.
- Assigned
- You had to buy (put) or sell (call) the shares.
- DTE
- Days to expiration.
- Delta
- A rough guess of the chance the option ends "in the money." A 0.20 delta is about a 20% chance.
Beginner mistakes
- Picking a stock because the premium is huge (big premium = big risk).
- Putting too much money into one stock.
- Selling calls below your cost and locking in a loss.
- Panicking when assigned instead of moving to Step 2.
Homework
Join the free Discord and post in #ask-anything:
- One stock you'd be happy to own for 5+ years.
- Why you picked it.
- Any question this lesson left you with.
We'll go through answers together.