Trading stock market options is simple. The essence is this:

  1. You are invited to place a bet on the outcome of an event: the price will rise, the price will fall, or the price won’t change. You determine how the price will move, chose the amount you want to bet, and make a bet.
  2. Other traders bet along with you. Some of them agree with you and some of them make bets on the other possible outcomes. A “bank” is formed out of the money from all of these bets, which will be divided after the expiration of the option, that is, when it is clear whether the price has risen, has fallen, or has remained as before.
  3. The “bank” is divided amongst those traders who have made the correct bet, according to how much each trader staked on that particular outcome. For example: the “bank” is $5000, of which $3500 is placed on the price increasing, $1000 on the price decreasing, and $500 on the price remaining the same. It’s easy to understand how much will be divided amongst those traders who have correctly predicted the movement of the price of the option.
    • The price didn’t change. The traders who bet $500 win. Their winnings come to $4500. Thus, they have won 900%.
    • The price fell. Those traders who staked $1000 win. Their total winnings are $4000. Thus, they have won 400%.
    • The price rose. The traders who bet $3500 win. Their total winnings are $1500 or 42%.

You will see in real time how many dollars are placed on each of the 3 variants, and you can place multiple bets on any outcome, up until the expiration date of the option.

It is necessary to consider:

Bets are accepted right up until the expiration date of the option. That is, the bank might increase, however, the number of bets on each outcome might also change. For example: one hour before the option expires, there is $1000 in the “bank,” and you decide to place a bet on the price rising. Let’s say that at that moment there is only $200 staked on the price rising, $800 staked on the price falling, and no bets are staked on the price staying the same. Thus, you have the potential to win 400%. However, by the time the option expires the situation may change in one of 3 ways:

  1. The total amount of bets on the price rising increases, let’s say, to $1600. The amount of bets on the price falling doesn’t change- $800, and there are still no bets on the price on not changing. Thus, your potential winnings will be 50%, or 50 cents on each dollar that you staked.
  2. The total amount of bets on the price rising doesn’t change -$200, but the amount staked on the price falling increases to $1600. There are no bets on the price not changing. Thus, your potential winnings will be 800% or $8 on each dollar that you staked.
  3. The amount staked on the price rising and the price falling become equal, while there still aren’t any bets on the price not changing. Thus, logically, your earnings will be 100%, that is, $1 on each dollar staked.

The stock exchange will automatically calculate your % of profit and will pay you after the expiration of the option. You need only determine how the price will change, place one or more bets on the price, and then wait for the expiration of the option.

Remarks:

From the moment the option expires, traders’ bets are no longer accepted.

If no bets were made on the winning outcome, then all bets are returned to the traders.

A bet cannot be canceled; a trader’s money is written off from their balance at the moment of execution.