OptionsScanner AI

Lesson 1 of 8 — Core Concepts

What Is an Option?

Options are not as complicated as they sound. At their core, an option is simply a contract that gives you the right — but not the obligation — to buy or sell a stock at a specific price before a specific date.

When you buy a stock, you own a piece of the company. When you buy an option, you own a contract based on that stock. That contract gives you a specific right for a specific period of time.

The most important word in options is "right." You are never forced to do anything. If the trade goes against you, you simply let the contract expire. Your maximum loss is always exactly what you paid for the contract — nothing more.

The insurance analogy — the best way to understand options

Think of a call option like car insurance in reverse. You pay a premium upfront (a small amount). In exchange, you get the right to "buy" the stock at today's price even if it goes way higher. If the stock doesn't move, your premium expires worthless — just like an unused insurance policy. If the stock surges, your contract becomes very valuable.

The premium you pay is your max loss. Always. You can never lose more than what you paid for the option.

The 4 key terms on every option contract

Term	What It Means	Example
Strike Price	The price at which you can buy or sell the stock	SOFI $19 Call = right to buy at $19
Expiration Date	The date the contract expires and becomes worthless if unused	Apr 24, 2026 — next Friday
Premium	What you pay for the contract. 1 contract = 100 shares.	$1.20/share × 100 = $120 total
Underlying	The stock the option is based on	SOFI, BAC, AMD

Why traders use options instead of stocks

Leverage: If SOFI goes from $19 to $21 (+10%), a stockholder gains 10%. An option buyer on that same move might gain 80–150%. Options amplify gains dramatically.

Defined risk: If you buy 800 shares of SOFI at $19, your risk is $15,200. If you buy 1 option contract on SOFI for $120, your maximum possible loss is $120 — even if SOFI goes to zero overnight.

The tradeoff: Options expire. If the stock doesn't move enough in the right direction before the expiration date, the contract expires worthless and you lose your entire premium.

"An option gives you the upside of owning 100 shares of a stock, while limiting your downside to only what you paid for the contract."

✦ Quick Check — Lesson 1

You buy 1 call option on BAC for a premium of $0.90 per share. BAC then crashes 30% overnight due to bad news. What is your maximum possible loss?

✅ Correct! When you buy an option, your maximum loss is always 100% of the premium you paid — in this case $90 (0.90 × 100 shares per contract). No matter how badly BAC crashes, the contract simply expires worthless. This defined risk is one of the most powerful features of buying options — you always know your worst-case scenario before you enter.

❌ When you buy an option (as opposed to selling one), your maximum loss is always capped at the premium paid. You paid $0.90/share × 100 shares = $90 total. If the stock crashes 30%, the contract expires worthless and you lose your $90 — but nothing more. This is fundamentally different from owning 100 shares of BAC, where a 30% crash would cost you thousands.

Lesson 1 of 8

Lesson 2 of 8 — Core Concepts

Calls vs Puts

There are only two types of options. Calls make money when stocks go up. Puts make money when stocks go down. That's the entire framework.

Every option is either a call or a put. Once you understand these two instruments, you can trade in any market direction — up, down, or even sideways.

📈 CALL Option — Bullish

A call gives you the right to buy 100 shares at the strike price. You buy a call when you believe the stock will go UP.

You profit when: The stock rises above your strike price + premium paid.

Example: Buy SOFI $19 Call for $1.20. If SOFI rises to $21.50, your option is worth ~$2.50+. You paid $120, it's now worth $250+.

Max loss: $120 (premium paid) if SOFI stays below $19.

📉 PUT Option — Bearish

A put gives you the right to sell 100 shares at the strike price. You buy a put when you believe the stock will go DOWN.

You profit when: The stock falls below your strike price − premium paid.

Example: Buy NFLX $97 Put for $1.50. If NFLX drops to $92, your option is worth ~$5.00. You paid $150, it's now worth $500.

Max loss: $150 (premium paid) if NFLX stays above $97.

Breaking even — the breakeven price

Option Type	Breakeven Formula	Example
Call	Strike Price + Premium Paid	$19 + $1.20 = $20.20 breakeven
Put	Strike Price − Premium Paid	$97 − $1.50 = $95.50 breakeven

You never have to exercise the option — just sell the contract

When beginners learn about options, they worry about "exercising" — actually buying or selling 100 shares. In practice, almost no retail trader ever exercises. You simply sell the contract back for more than you paid when it's profitable, just like selling a stock.

If you bought a SOFI $19 Call for $1.20 and it's now worth $2.40, you sell the contract for $2.40 and pocket the difference ($1.20 gain × 100 = $120 profit). Done.

✦ Quick Check — Lesson 2

NFLX just crashed 10% after a bad earnings report. You believe it will keep falling over the next week. Which option should you buy, and why?

✅ Correct! A put option gains value as the stock price falls. If you expect NFLX to continue declining after its earnings crash, buying a put allows you to profit from that move with limited risk. Your max loss is just the premium paid. If NFLX drops from $97 to $90, your put increases significantly in value and you sell the contract for a profit.

❌ When you expect a stock to fall, you buy a put option — not a call. Calls gain value when a stock rises, puts gain value when a stock falls. Buying a put on a declining stock is one of the core strategies in options trading. Your max loss is always just the premium you paid for the put contract.

Lesson 2 of 8

Lesson 3 of 8 — Core Concepts

The Greeks — Plain English

Greeks sound intimidating but each one answers a simple question. You only need four. Master these and you'll understand what every option contract is actually doing.

Options traders use "the Greeks" — letters from the Greek alphabet — to describe how an option's price changes under different conditions. You don't need math. You need the plain-English version of what each one means for your trade.

Δ

Delta

How much does my option gain per $1 move in the stock?

Delta 0.60 → stock goes up $1 → option gains $0.60 (×100 = $60 per contract)

Θ

Theta

How much does my option lose per day just from time passing?

Theta −0.08 → you lose $8 per day even if the stock doesn't move

IV

Implied Volatility

How expensive is this option right now? High IV = overpriced. Low IV = cheap.

IV 80% → very expensive. IV 25% → cheap. Buy low IV, avoid high IV.

Γ

Gamma

How quickly does delta change as the stock moves?

High gamma = delta accelerates as stock moves in your direction. Good for buyers.

Vega

How much does my option gain/lose per 1% change in implied volatility?

Buy options when IV is low. Sell or avoid when IV spikes (like after earnings).

📌

Focus On These

For the 1-week momentum strategy, the only Greeks you need to watch daily are Delta and Theta.

Target Delta 0.55–0.70. Monitor Theta daily cost. Check IV before buying.

Theta is the enemy of option buyers

Every single day that passes, your option loses value — even if the stock doesn't move at all. This is called time decay. On weekly options, theta accelerates dramatically in the last 2–3 days before expiration.

The 1-week rule: Always plan to exit your weekly options by Wednesday. Thursday and Friday have brutal theta decay. Holding into Friday expiration hoping for a last-minute move is how beginners lose their entire premium.

IV Crush — the most common beginner mistake

Before earnings, implied volatility spikes because no one knows which way the stock will go. Options become very expensive. When earnings are announced — even on a great beat — IV collapses instantly. This is called "IV crush."

Result: You bought a call before earnings. The stock went UP 5% as expected. But your option LOST value because IV dropped 40% the moment earnings were released. The stock moved the right way — and you still lost money.

Rule: Never buy weekly options into an earnings report. The OptionsScanner flags this automatically.

✦ Quick Check — Lesson 3

It's Tuesday at 11 AM. You own a SOFI call expiring this Friday. SOFI hasn't moved much since Monday. Your option has lost $18 since you bought it yesterday, even though SOFI's price is almost unchanged. What is causing this loss?

✅ Correct! Theta is time decay — the daily cost of holding an option. Even when the stock goes nowhere, your option loses value every single day simply because the expiration date is getting closer. On a weekly option expiring Friday, theta can cost $10–$25 per day. This is why you need the stock to move quickly and in your direction when buying weekly options — time is actively working against you.

❌ The stock barely moved, so delta and gamma are not the cause. The answer is Theta — time decay. Every day that passes, your option loses value automatically, regardless of what the stock does. On a weekly option (expiring in 3 days), theta is especially aggressive. This is the most important concept for weekly option buyers: you're racing against time. The stock needs to move in your direction quickly, or theta eats your premium.

Lesson 3 of 8

Lesson 4 of 8 — Core Concepts

ITM, ATM & OTM Strikes

Choosing the right strike price is one of the most impactful decisions you make. It determines your cost, how much the option moves, and your probability of profit.

When you open an options chain, you see a list of strike prices above and below the current stock price. Each strike behaves very differently. Understanding the three categories — ITM, ATM, OTM — is essential before placing any trade.

Category	What It Means	For a Call at Stock $19.50	Cost / Delta
ITM In The Money	Strike is already "in your favor." Call strike below current price. Put strike above current price.	$18, $19 Call	Higher cost, Delta 0.60–0.80
ATM At The Money	Strike closest to the current stock price.	$19.50 or $20 Call	Medium cost, Delta ~0.50
OTM Out of The Money	Strike is not yet in your favor. Call strike above current price. Put strike below current price.	$21, $22, $23 Call	Cheapest, Delta 0.10–0.35

Why the strategy uses slightly ITM options

OTM options are cheap and tempting — a $0.20 option that could become $1.00 sounds amazing. But OTM options require a large move just to reach breakeven, and they lose value very fast with theta decay. On a weekly option, OTM is usually a lottery ticket.

Slightly ITM options (delta 0.55–0.70) give you the best balance: they're more expensive upfront, but they move more reliably with the stock, they have intrinsic value that protects against theta, and they have a higher probability of staying in profit if your direction is right.

Intrinsic value vs time value

Every option's premium has two components. Intrinsic value is the "real" value — how much the option would be worth if you exercised it today. An ITM call with a $19 strike when the stock is at $19.80 has $0.80 of intrinsic value. Time value is the extra premium you pay for the possibility that the stock moves further in your favor before expiration. Time value evaporates to zero at expiration (that's theta at work).

Option Premium = Intrinsic Value + Time Value

ITM options have both. OTM options have time value only (intrinsic = $0).

SOFI $19 Call, stock at $19.80: Intrinsic = $0.80, Time = $0.40 → Premium = $1.20

✦ Quick Check — Lesson 4

BAC is trading at $54.40. You're choosing between a $54 Call (costs $1.10, delta 0.62) and a $57 Call (costs $0.25, delta 0.18) expiring next Friday. Which is better for the 1-week momentum strategy, and why?

✅ Correct! The $54 Call is slightly ITM (stock at $54.40) with a delta of 0.62 — meaning it gains $0.62 for every $1 BAC moves up. It also has intrinsic value ($0.40) that acts as a buffer against theta decay. The $57 Call has only a 0.18 delta — BAC needs to rise more than $3 just to approach the breakeven, and with 5 days left, theta will likely destroy most of that $0.25 premium before it gets there.

❌ Cheaper is not better in weekly options. The $57 Call costs $0.25 because it's far OTM (delta 0.18) — BAC needs to rise over $3 just to reach the strike, and with only a week left, theta will erode most of that $0.25 before expiration. The $54 Call is the right choice: slightly ITM, delta 0.62 means it moves $0.62 per $1 in BAC's favor, and it has intrinsic value that theta can't fully destroy in one week.

Lesson 4 of 8

Lesson 5 of 8 — Execution

Reading an Options Chain

The options chain is where you choose and buy your contract. It looks overwhelming at first — rows and columns of numbers — but you only need to read 6 columns.

In Robinhood, tap any stock → tap "Trade" → tap "Trade Options" → select your expiration date. You'll see the options chain. Here's what each column means:

Column	What It Shows	What to Look For
Strike	The price you can buy/sell the stock at	Choose slightly ITM (just below stock price for calls)
Bid	Highest price a buyer will pay right now	—
Ask	Lowest price a seller will accept right now	—
Mid (Mark)	Midpoint between bid and ask	Use this as your limit order price
Delta	How much the option moves per $1 in the stock	Target 0.55–0.70 for weekly calls/puts
Open Interest	Total number of contracts outstanding	Higher = more liquid = easier to buy and sell

The bid-ask spread — always use a limit order at the midpoint

The bid-ask spread is the gap between what buyers will pay and what sellers want. On options, this spread can be wide — for example, bid $1.10, ask $1.50. If you use a market order, you'll pay $1.50. If you place a limit order at the midpoint ($1.30), you'll often get filled at $1.25–$1.30.

On a $1.30 fill vs a $1.50 fill: that's $20 saved per contract. On 2 contracts, that's $40 — a meaningful edge over hundreds of trades.

In Robinhood: Tap "Limit" when placing the order → enter the midpoint price → submit. If not filled in 2 minutes, move your limit up by $0.05 and try again.

How to read the chain in Robinhood step by step

1

Open the stock → Trade → Trade OptionsYou'll see two tabs: "Calls" and "Puts." Select the appropriate one for your direction.

2

Select the expiration dateTap the expiration date dropdown at the top. For the 1-week strategy, select next Friday. The chain updates to show that week's contracts.

3

Find the slightly ITM strikeThe current stock price is shown at the top. Scroll to the strike just below it (for calls). That's your slightly ITM target. Check the delta — if it's 0.55–0.70, you're in the right zone.

4

Check the mid price and open interestLook at the bid and ask. Calculate the midpoint. Make sure open interest is above 500 — low open interest means low liquidity and wide spreads.

5

Place a limit order at the midpointTap the contract → tap "Buy" → change order type to "Limit" → enter the midpoint price → choose 1 contract → confirm. Your max loss is (limit price × 100).

✦ Quick Check — Lesson 5

You're looking at a SOFI $19 Call expiring next Friday. The bid is $1.05 and the ask is $1.45. What limit price should you set for your order?

✅ Correct! The midpoint between $1.05 and $1.45 is $1.25. Placing a limit order at the midpoint ($1.25) means you're offering a fair price that market makers will often accept, saving you $0.20/share ($20 per contract) vs. paying the ask. If you're not filled in a minute or two, move the limit up to $1.30. Never use a market order on options — the spread is too wide and you'll overpay consistently.

❌ Using a market order or paying the ask ($1.45) means overpaying the spread. The bid ($1.05) is too aggressive and may never fill. The right approach is the midpoint: ($1.05 + $1.45) ÷ 2 = $1.25. This is a fair price that usually gets filled and saves you $20 per contract vs. paying the ask. Over many trades, these savings add up significantly.

Lesson 5 of 8

Lesson 6 of 8 — Execution

Buying vs Selling Options

You can be on either side of an options contract. Buying and selling options have completely different risk profiles. For beginners, only buy options — never sell them naked.

Action	Who Does It	Max Gain	Max Loss	Right for Beginners?
Buy a Call	Bullish trader	Unlimited (stock can keep rising)	Premium paid	✅ Yes
Buy a Put	Bearish trader	Large (stock can go to zero)	Premium paid	✅ Yes
Sell a Call (naked)	Income trader	Premium received	Unlimited (stock can go to ∞)	❌ Never for beginners
Sell a Put (naked)	Income trader	Premium received	Very large (stock to zero)	❌ Never for beginners

Why naked option selling is dangerous for beginners

When you sell a call option without owning the stock, you collect a small premium upfront. But if the stock surges, you're obligated to deliver shares at the strike price — your loss is theoretically unlimited. A $500 premium collected can turn into a $50,000 loss if the stock explodes upward.

This is not the strategy we use. We only buy options. Defined risk. Maximum loss = premium paid. Period.

Exit rules for bought options — the complete framework

Take profit at +80–100% gain: If you paid $120 for a contract and it's worth $220, sell it. Don't get greedy waiting for $300.

Cut loss at −50%: If your contract drops to $60 (50% of what you paid), exit. The remaining $60 is not worth risking — theta will destroy it anyway.

Exit by Wednesday for weekly options: Never hold a weekly option into Thursday or Friday. Theta decay in the final two days is brutal. If your contract isn't profitable by Wednesday, close it at whatever it's worth.

Never average down on options: Unlike stocks, a losing option doesn't recover with time — it decays to zero. If your thesis was wrong, accept it and exit.

✦ Quick Check — Lesson 6

You bought 1 SOFI $19 Call for $1.30 ($130 total). It's now Thursday afternoon and the contract is worth $0.55. SOFI has barely moved all week. What should you do?

✅ Correct! On Thursday of expiration week, theta decay is at its most aggressive. A contract worth $0.55 today may be worth $0.10–$0.20 by Friday close if SOFI doesn't move significantly. You've already lost $0.75 per share — selling now recovers $55 of your $130. Holding through Thursday/Friday hoping for a miracle almost always results in losing the entire remaining premium. Sell Thursday, preserve capital, trade again next week.

❌ Holding through Thursday and Friday on a weekly option that hasn't worked is one of the most common ways beginners lose their entire premium. Theta decay on the last two days of a weekly option is extremely aggressive. Your $0.55 contract could easily reach $0.05–$0.10 by Friday close if SOFI doesn't move sharply. Sell Thursday and recover $55. Never average down on losing options — they don't recover with time, they decay to zero.

Lesson 6 of 8

Lesson 7 of 8 — Execution

The 1-Week Momentum Strategy

This is the complete options trading system — every rule, every filter, every decision. Follow all of it or none of it. Partial systems don't work.

The strategy in one sentence

Buy a slightly in-the-money call on a bullish breakout, or a slightly in-the-money put on a bearish breakdown, expiring next Friday, when all 5 conditions are met — and exit by Wednesday at a +80% gain or −50% loss.

The 5 entry conditions — all must be true

✅VIX is below 25. Above 25 = options are expensive, reduce size. Above 30 = no trade.

✅No earnings report before the expiration Friday. Earnings = IV crush = avoid.

✅Stock is in a clear momentum direction on the 5-min chart — above 9 EMA (calls) or below 9 EMA (puts)

✅IV is below 60%. Above 60% = overpriced options, reduce to half size. Above 80% = skip.

✅Time is 10:00–11:30 AM ET. Enter after the opening volatility settles.

🚫BLOCK: Earnings within 7 days (not just 3). IV risk is too high even days before.

🚫BLOCK: Stock already moved more than 3% today — chasing a move means you're overpaying.

Strike and contract selection rules

Parameter	Rule	Why
Strike	Slightly ITM (delta 0.55–0.70)	Best balance of cost, movement, and intrinsic value protection
Expiration	Next Friday	1-week horizon matches the momentum setup timeframe
Max premium	$150 per contract on $10K account	Keeps risk per trade at 1.5% of account
Max contracts	2 contracts maximum	Keeps total risk manageable while allowing scale
Order type	Limit at the midpoint	Never overpay the spread

Exit rules — non-negotiable

+

Profit target: +80–100% gain on the contractIf you paid $130 for a contract, sell when it reaches $234–$260. Set a GTC limit sell order immediately after buying.

−

Stop loss: −50% of premium paidIf your $130 contract drops to $65, sell immediately. Place a limit sell at $0.65/share right after entry.

W

Time stop: Exit by Wednesday close, no exceptionsIf your contract is profitable but hasn't hit target by Wednesday, close it and take the gain. Never hold into Thursday/Friday theta destruction.

W

If losing by Wednesday: exit and move onIf it's Wednesday and the contract is at a loss but above 50%, close it anyway. Do not hope for a Thursday/Friday recovery. Options don't recover on hope.

✦ Quick Check — Lesson 7

You want to trade a SOFI call expiring next Friday. SOFI reports earnings in 5 days (Thursday before expiration). All other conditions look perfect — great momentum, low VIX, stock above 9 EMA. Should you take the trade?

✅ Correct! Earnings in 5 days (Thursday) means two things: (1) IV is already elevated right now — you're overpaying for the contract because the market is pricing in earnings uncertainty, and (2) even if you're planning to exit Wednesday, IV will be at its highest point Monday–Wednesday, making your contract more expensive to sell AND more volatile in both directions. The rule is earnings within 7 days = skip. There will always be another setup next week without this risk.

❌ Even though earnings are technically Thursday (after your Wednesday exit plan), the earnings risk affects the option right now. With earnings in 5 days, IV is already artificially elevated — meaning you're overpaying for the contract today. Additionally, any earnings pre-announcement, guidance change, or news leak before Thursday can destroy your position. The 7-day earnings rule exists precisely for this situation. Skip it and find a cleaner setup.

Lesson 7 of 8

Lesson 8 of 8 — Execution

Full Trade Walkthrough

Let's put everything together. A real BAC call trade from Sunday night research to Wednesday exit — every step, every number, every decision point.

Sunday evening — research

1

OptionsScanner night scan finds BACBAC closed at $54.40 on Friday. Q1 earnings reported April 15 — already done, no earnings risk. Strong post-earnings uptrend. Next earnings: July (8+ weeks away). VIX: 17.8 (calm).

2

Check IV levelOpen Robinhood → BAC → Trade Options → select Apr 24 expiration. Look at the $54 Call. IV shows approximately 28% — well below the 60% threshold. Options are fairly priced. Green light.

3

Write the trade plan"Monday: If BAC is above 9 EMA on the 5-min chart after 10 AM with volume, buy 1 BAC $54 Call expiring Apr 24. Target entry: $0.80–$1.10. Stop: exit if contract drops to 50% of entry. Target: exit at 80–100% gain. Exit by Wednesday regardless."

Monday morning — confirmation

4

Pre-market check (8:00 AM)BAC pre-market: $54.55 (+0.3% from Friday close). S&P futures: +0.3% green. VIX: 17.5. No overnight news on BAC. All conditions intact.

5

9:30–10:00 AM — watch onlyBAC opens at $54.60, pulls back to $54.35, recovers to $54.50. Choppy opening — expected. 9 EMA on 5-min chart is at $54.42. Stock is just above it. Watch and wait.

6

10:10 AM — entry signalNew 5-min candle: strong green body closing at $54.72. Volume 1.8× average. Stock clearly above 9 EMA ($54.48). All 5 conditions met. Open Robinhood → BAC → Trade Options → Apr 24 → $54 Call.

The actual trade

7

Read the chain: $54 Call, Apr 24Bid: $0.88, Ask: $1.14, Mid: $1.01. Delta: 0.62. Open interest: 4,200 contracts (very liquid). IV: 31%. Everything looks good. Place limit buy at $1.01.

8

Order fills at $1.01 — $101 total cost (1 contract)Max loss: $101. Immediately place two limit sell orders: (1) a limit sell at $1.85 (83% gain target). (2) A stop limit sell at $0.50 (50% loss stop). Both orders are now working.

9

Tuesday 10:45 AM — BAC at $55.40BAC has risen $1.00 since entry. Delta was 0.62 → option gained ~$0.62. Contract is now worth approximately $1.63. Up $62 (62% gain). Still trending above 9 EMA. Hold for target.

10

Tuesday 2:00 PM — Target hitBAC reaches $55.55. The $54 Call is now worth $1.88. The limit sell at $1.85 fills automatically. Trade closed.

Result: Paid $1.01 → Sold $1.85 → Profit $0.84/share × 100 = +$84 on a $101 investment = +83% gain.

Post-trade review

What went right: Waited for 10 AM confirmation. Checked IV before entry (31% — cheap). Used a limit order at the midpoint. Set both profit target and stop loss immediately after fill. Let the limit sell work automatically without watching every tick.

What to note: The trade closed Tuesday afternoon — well before the Wednesday deadline. This is ideal. Thursday/Friday theta would have started eating into the premium significantly.

Session: 1 contract, $101 at risk, +$84 profit, 83% gain in ~28 hours. ✅

✦ Final Check — Lesson 8

In the walkthrough, the trader placed two orders immediately after their buy filled: a limit sell at $1.85 and a stop limit sell at $0.50. Why is it important to place BOTH orders right away?

✅ Correct! Options move fast. BAC could hit your target while you're in a meeting or run against you while you're asleep. By placing both orders immediately after entry, you've automated the entire trade management: the profit target fires if BAC surges, and the stop loss fires if it drops — all without you having to watch a screen. This is the professional way to manage options positions. Emotion-free, automatic, systematic.

❌ The reason is automation and protection. Options can move 30–50% in either direction within an hour on momentum. By placing both orders immediately: (1) the profit target sells automatically if BAC runs up while you're not watching, and (2) the stop loss protects you from a sudden reversal destroying your position. Managing options manually while watching every tick leads to emotional decisions — either holding too long or panic-selling. Set both orders, walk away, let the rules work.

Lesson 8 of 8