To The Moon

Strike prices. Implied volatility. The Greeks.

New to options? The terminology can feel overwhelming, yet the core idea is intuitive: pay a cost today to lock‑in a choice for tomorrow.

Think of paying extra for a flight ticket that lets you cancel before a specified date. You are paying for flexibility — even if you never end up using that option.

An option works on the same logic. The buyer pays a premium to obtain the right to buy or sell an asset at an agreed strike price within a set timeframe. If assigned, the seller must fulfil the corresponding obligation.

This concept is far from new. The Greek philosopher Thales famously secured rights to olive presses ahead of an expected bumper harvest and profited when demand surged. Centuries later, the introduction of standardised stock options at Cboe in 1973 laid the foundation for today’s modern options market.

Today, investors use options to voice their market outlook, hedge existing holdings, or earn premium income. Each strategy carries distinct risks.

1. Buyers and Sellers: Know the Difference

Buyers purchase a right. For a long standalone option, your maximum loss from the option itself is the total premium paid plus fees. You can lose your entire premium, and exercising the option may bring further obligations via stock positions.

Sellers collect premium income but take on obligations. Losses can be significant, and American‑style options may get assigned prior to expiry. Selling naked calls involves potentially unlimited loss risk.

One standard US equity option typically covers 100 shares. An option quoted at US$2 will generally cost US$200 per contract, excluding fees. Singapore‑based investors should also account for how USD‑SGD exchange rate swings impact overall returns.

2. Four Basic Positions at a Glance

Buy a call: Gain exposure to potential price upside. The underlying needs to move far enough to cover premium and trading costs.

Buy a put: Express a bearish view, or protect share holdings against price drops. This protection comes at a premium and is only valid for a limited time.

Sell a covered call: Earn premium on shares you already own. Your upside profit is capped, while your shares remain exposed to downside risks.

Sell a cash‑secured put: Collect premium while setting aside cash to purchase shares should you be assigned. You may be required to buy stock at the strike price even if the market price falls sharply.

Getting the market direction right does not guarantee profit. Timing, pricing and contract selection all matter greatly.

3. Three Key Indicators to Understand

Implied volatility (IV) reflects expected future price moves priced into an option. An abrupt drop in IV after a major event — known as an “IV crush” — can hurt option buyers, even when the stock moves in their favoured direction.

Delta measures how much an option price tends to change relative to movements in the underlying share price. It shifts with market conditions and does not guarantee returns.

Theta captures time‑decay effects. Time erosion generally works against option buyers, especially close to expiry, and it does not guarantee profits for sellers.

Also watch the bid‑ask spread: wide gaps between buy and sell prices can raise your costs when opening or closing positions.

4. Learn First, Trade with a Plan

Before entering any trade, ask yourself these questions: ‑ What market outcome needs to happen for this position to make money? ‑ What is my maximum potential loss? ‑ What occurs at expiry or if I receive an assignment? ‑ Am I able to meet any cash or share delivery obligations?

Worked examples and simulated trading help build familiarity, though real‑live trading conditions may differ.

Dive into Tiger’s options education resources to grow your knowledge of contracts, strategies and risks — one step at a time.

Check out the latest options welcome offer🎁 first.👉 Join Now>>

🎯 What is your biggest question about options?

Choosing a strike price? Understanding IV? What happens at expiry?

Drop your question in the comments!