Market Rebellion Education
Market Rebellion offers in-depth trader education, coaching and mentoring – from beginner to advanced – to help you build the knowledge base and practical skills to trade with confidence.
Welcome to Options School 101
Lead Instructor Bill Johnson is a renowned trading educator who’s authored numerous books on markets and finance. Now, he’s built Options School 101 to help you learn the core concepts and fundamentals of options trading — including basics of technical analysis, specific options strategies, and how to manage your trades.
Options Trading: Direction, Magnitude, and Speed
Trading options requires more than thinking the stock’s price will rise or fall. In addition, options traders must account for how much the stock will move and how aggressively.
Calls and Puts: The Building Blocks of All Options Strategies
Options strategies come in dozens of shapes and sizes, but they’re all built on two basic positions—calls and puts.
Profit & Loss Diagrams
Options traders can have bullish, bearish, or neutral views. Each strategy carries different risks and rewards, and the best way to understand them is to visualize them with profit and loss diagrams.
Options vs. Stock: The Option Advantage
Options provide many advantages over stock: limited risk, increased ROI, better cash efficiency, safer alternative to shorting stock, and the ability to roll.
Volatility & Options
For stock traders, volatility is a measure of risk. For options traders, it’s the main measure of value. Why do option prices rise when volatility rises? How should traders account for volatility before placing trades?
Four Types of Options Positions
Options strategies fall into one of four categories: speculation, hedging, spreads, and combinations. What are the differences and what are the advantages?
Option Greeks
Options have different risks than stocks, which are measured by the Greeks: delta, gamma, theta, vega, and rho. What are these risk measures and why are they important?
The Risk-Reward Connection
Once you understand the risk-reward connection, you’ll see why no strategy can be “better” than another. Options trading is about finding the right level of risk and reward—not the “perfect” strategy.
Rolling Options
Rolling a position is one of the strongest forms of risk management. What is rolling, and why does it give options traders an advantage over stock traders?
Unusual Option Activity
We pioneered Unusual Option Activity, an order flow strategy geared to follow the “smart money” — looking at where options are being bought compared against “normal” levels.
Open Interest
Options traders must specify if they’re “opening” or “closing” a position, and these will change the “open interest” for a particular expiration and strike. What is open interest and how does it change?
Candlesticks
Candlesticks are a type of charting style that allow traders to get better insights into potential turning points in the market to help traders with decisions. What are candlesticks and how do you read them?
Options Strategies
Options provide traders with a variety of different strategies designed to match their specific time frames and financial goals. They’re the building blocks to how we trade at Market Rebellion.
Long Call
BullishBuy Call
Bull Call Spread (Vertical Bull Spread)
BullishBuy 1 call, sell 1 call at higher strike OR sell 1 put, buy 1 put at lower strike
Covered Call (Buy-Write)
BullishBuy 100 shares of stock, sell 1 call
Protective Put (Synthetic Call)
BullishBuy 100 shares of stock, buy 1 put
Long Butterfly Spread
NeutralBuy 1 call, sell 2 calls at higher strike, buy 1 call at an even higher strike; all equidistant & same expiration
Short Put
BullishSell 1 put option
Short Butterfly Spread
NeutralSell 1 call, buy 2 calls at higher strike, sell 1 call at an even higher strike; all equidistant & same expiration
Long Straddle
NeutralBuy 1 call and 1 put with the same strike price and expiration
Short Straddle
NeutralSell 1 call and 1 put with the same strike price and expiration
Long Strangle
NeutralBuy 1 call and 1 put with different strike prices but same expiration
Short Strangle
NeutralSell 1 call and 1 put with different strike prices but same expiration
Long Condor
NeutralBuy 1 call at a strike, sell 1 call at a higher strike, sell 1 call at even higher strike, and buy 1 call at even higher strike; all equidistant & same expiration
Short Condor
NeutralSell 1 call at a strike, buy 1 call at a higher strike, buy 1 call at even higher strike, and sell 1 call at even higher strike; all equidistant & same expiration
Calendar Spread (Time Spread)
NeutralBuy 1 call at one expiration and simultaneously sell 1 call at the same strike with a shorter expiration (can also be created with puts)
Covered Put (Sell-Write)
BearishShort 100 shares of stock, sell 1 put
Long Put
BearishBuy put
Bear Put Spread (Vertical Bear Spread)
BearishBuy 1 put, sell 1 put at a lower strike OR sell 1 call, buy 1 call at higher strike
Protective Call (Synthetic Put)
BearishShort 100 shares of stock, buy 1 call
Collar
BearishBuy 100 shares of stock, simultaneously buy 1 put and sell 1 call
Short Call
BearishSell 1 call option (WARNING: High Risk – Must Read)
One-on-One Coaching
Get in-depth answers to your individual questions. Learn how to find trading opportunities and, more importantly, how to enter, manage and exit those trades.
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Stu Dorfman
Stu is a professional options trader with 40 years of experience trading on the floor of the Philadelphia Stock Exchange and serving on various exchange committees.
Scott Thorstensen
Known for building strong personal relationships with his students, Scott has spent the last 20 years teaching individual traders every angle of the options world.
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