I made my first options call contract purchase. Bought a right to buy 100 shares of a certain stock at a premium. Currently in the green and I foresee it staying there for the time of expiration in 2 months.
This contract is a derivative of shares, which is why it is called derivatives trading or options trading. I am not buying 100 shares, but I can choose to buy the 100 shares at some point during this contract or sell the contract to someone else at a higher price. If I don't like the price of the shares when the contract is up then the contract can expire worthless meaning I lose my premium.
The most important number to look at if you want to make a profit when options trading is the break even price assuming you want to exercise it in the future. If you purchase a contract that says you can buy 100 shares at $5 strike price with a $1 premium then you are paying $500 + $100 = $600 total. Your break even price is $6 per share.
If you want to make a profit with buying and selling contracts then the most important numbers would be volume and open interest. It is likely the best way to make money with options. High volume typically means your contract will sell quickly near the lowest ask price. Again, you buy a contract with $5 strike price with $1 premium. Tomorrow the premiums go up by $1, you can sell your contract for $2 premium. You've gain 100% what you've paid.
I can see why some people go nuts or wanna kill themselves over contracts. I think derivatives trading is odd and risky as fuck, so I only bought 1 contract to dip in. Can't be resistant to change, so I have to do things that help keeps an open mind. There are different types of derivatives trading like betting on that a debtor will default on a financial contract 😂, which is what Bill Ackman did and is doing.