Options trading might seem intimidating at first glance, with terms like “calls,” “puts,” “spreads,” and “strikes” being thrown around. But once you peel back the jargon, options can be a powerful tool — even for beginners. The key is to start with low-risk, easy-to-understand strategies that let you get a feel for the market without exposing yourself to massive losses.
In this article, we’ll break down what options are, why they’re worth learning, and the top beginner-friendly options strategies you can start using today. Whether you’re looking to hedge your portfolio, earn extra income, or just get a taste of the trading world, you’ll find something here that works for you.
Understanding Options Basics
Before diving into strategies, let’s get some quick definitions out of the way:
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Call Option: Gives the buyer the right (but not the obligation) to buy a stock at a certain price (strike price) before expiration.
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Put Option: Gives the buyer the right to sell a stock at a certain price before expiration.
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Premium: The price you pay to buy an option contract.
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Strike Price: The set price at which the underlying asset can be bought or sold.
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Expiration Date: The date on which the option contract becomes void.
Options are flexible tools that can be used for speculation, hedging, or generating income. But for beginners, the focus should be on strategies with limited downside risk and clear entry/exit points.
Why Start with Low-Risk Strategies?
Beginner traders should prioritize capital preservation. While options can deliver big returns, they can also lead to significant losses if used recklessly. The strategies below offer a great balance between risk and reward, and they’re structured in ways that are simple to understand and execute.
1. Covered Call – Generate Income from Stocks You Own
Best for: Investors who already own stocks and want to earn extra income.
A covered call involves:
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Buying (or already owning) 100 shares of a stock.
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Selling a call option on that stock.
You receive a premium for selling the option, which acts as extra income. If the stock rises above the strike price, the buyer can exercise the option and you'll be required to sell your stock — but you still keep the premium.
Example:
You own 100 shares of Apple (AAPL) at $170. You sell a 1-month call with a $175 strike price for a $2 premium.
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If AAPL stays below $175 → you keep the premium, and your stock.
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If AAPL rises above $175 → you sell your shares at $175, still keeping the $2 premium.
Why it’s good for beginners:
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Low risk if you already own the shares.
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Generates income even if the stock goes sideways.
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Teaches you how options premiums work.
2. Cash-Secured Put – Get Paid to Buy Stocks at a Lower Price
Best for: Traders who want to own a stock at a discount.
A cash-secured put involves:
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Selling a put option on a stock you wouldn’t mind owning.
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Setting aside enough cash to buy 100 shares if assigned.
You’re paid a premium for agreeing to potentially buy the stock. If the stock drops below the strike price, you’ll be “assigned” and required to buy — but that’s okay, because you wanted it anyway (and at a lower price!).
Example:
You want to own Microsoft (MSFT), which is trading at $320. You sell a $310 put and get a $3 premium.
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If MSFT stays above $310 → you keep the premium, no shares bought.
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If MSFT drops below $310 → you buy it at $310, but with the $3 premium offsetting the cost.
Why it’s good for beginners:
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It’s a win-win if you choose the right stock.
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Gives you a buffer against falling prices.
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Simple to manage and understand.
3. Long Call – Low-Cost Bullish Bet
Best for: Traders with a small account who want exposure to upside.
A long call is simply buying a call option if you think a stock will rise.
Example:
Tesla (TSLA) is at $200. You buy a $210 call that expires in 1 month for $5.
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If TSLA goes to $230 → your option is worth at least $20 ($230 - $210).
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If TSLA stays below $210 → the option expires worthless, and you lose the $5 premium.
Why it’s good for beginners:
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Limited risk (only the premium paid).
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Great way to practice chart reading and timing.
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No need to own the underlying stock.
4. Long Put – Protection or Bearish Speculation
Best for: Traders looking to profit from or protect against a falling stock.
A long put is buying a put option if you expect the stock to go down.
Example:
NVIDIA (NVDA) is trading at $600. You buy a $580 put for $7.
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If NVDA drops to $550 → your option is worth at least $30.
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If NVDA stays above $580 → your option expires worthless, losing $7.
Why it’s good for beginners:
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Limited risk (premium only).
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A way to “short” without borrowing stock or using margin.
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Can be used as a hedge if you already own the stock.
5. Protective Put – Insurance for Your Stocks
Best for: Investors worried about potential downturns.
A protective put is when you own a stock and buy a put option to protect against loss.
Example:
You own 100 shares of Netflix (NFLX) at $500. You buy a $480 put for $6.
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If NFLX drops to $450 → your put limits your loss to $26 (from $500 to $480, minus the $6 cost).
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If NFLX goes up → your stock gains, and the put expires worthless.
Why it’s good for beginners:
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Helps manage downside risk.
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Ideal for volatile stocks.
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A good way to learn about hedging.
Pro Tips for Beginner Options Traders
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Start small: Begin with one contract and work your way up.
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Use paper trading platforms: Practice without risking real money.
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Know the Greeks: Understand how delta, theta, and implied volatility affect your position.
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Focus on quality stocks: Don’t trade options on penny stocks or low-volume tickers.
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Have a plan: Know your entry, exit, and maximum risk before entering any trade.
Product Recommendation for Beginners
To help manage and track your options trading journey, consider using an options trading journal or planner. One top-rated product on Amazon is:
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Custom pages to record every trade’s entry, exit, reason, and results.
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Helps track progress and refine your strategy over time.
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Includes tips and ideas for evaluating trades.
Final Thoughts
Options trading doesn’t have to be overwhelming — especially if you begin with strategies tailored to new traders. Covered calls, cash-secured puts, long calls, and protective puts are all excellent entry points that teach essential skills with limited risk.
Start by practicing with virtual money, build confidence, and scale up gradually. Once you understand the basics, the options world opens up a whole range of possibilities — from conservative income generation to advanced speculative plays.
The most important thing? Keep learning and stay disciplined. With time, you’ll gain the knowledge and instinct to use options as a powerful tool in your trading arsenal.
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