Look. I am here to save yaw by telling yous the truth. Survivorship bias may mean that you ain't broke yet, but we all know that there are some Ralph Wiggums in this group.
Imma make this in simple terms that you can understood.
The Basic Basics
BID - The dollar figure you yells out at yo' ho to get in your lifted truck
ASK - The dollar figure ya ho hollas back at you from in front of the Spaghetti Factory
SPREAD - The marmalade in between
OPTION - The right, but not the obligation, to kick yo ass when you come into my domiciliary to steal my 3-ply
PREMIUM - The cost of the option
STRIKE - The fixed price at which the option can be exercised
EXCERCISE - Nothing yo fat ass would know about
Options are "simple". Like jerkin' off, there are two main tools to do it - ya right hand (CALL) and ya left hand (PUT). You can make is as complicated as you want like going inverted, ghost, or asking Aunt Becky to helps ya. You can go LONG, like when Aunt Becky shows up, or SHORT when Uncle Jesse pinch hits after hearing your voice mail on the Katsopolis answering machine.
LONG CALL - You BUY a CALL OPTION thinking that Aunt Becks shows up (you think stonk price increases)
LONG PUT - You BUY a PUT OPTION thinking that Uncle Jesse shows up (you think stonk price decreases)
SHORT CALL - You SELL a CALL OPTION thinking that Uncle Jesse shows up or almost nothing happens
SHORT PUT - You SELL a PUT OPTION thinking that Aunt Becks shows up or almost nothing happens
I says "almost nothing" because the goal of the SHORT positions is to pocket the premium. The goal of the LONG positions is for the market value of the OPTIONS to exceed the STRIKE + PREMIUM.
LONG CALL example: You paid $100 to buy TSLA 500 CALLS expiring this Friday because you are dumb af. Since the Strike is $500, and you are LONG CALL, your breakeven is $600 ($500 STRIKE + $100 PREMIUM). The most you can make is infinity, the most you can lose is $100.
Scenarios on Friday:
1) TSLA Stonk Price is $601, you make $1 ($601 PRICE - $500 STRIKE - $100 PREMIUM)
2) TSLA Stonk Price is $599, you lose $1 ($599 PRICE - $500 STRIKE - $100 PREMIUM)
3) TSLA Stonk Price is $500, you lose $100 ($500 PRICE - $500 STRIKE - $100 PREMIUM)
4) TSLA Stonk Price is <$499, you lose $100 (Option not exercised unless yous a retread)
SHORT CALL example: You sold TSLA 500 CALLs expiring this Friday for $100 cuz you think you smart or sumthin'. The most you can make is $100, the most you can lose is infinity.
1) TSLA Stonk is $601, you lose $1 ($100 PREMIUM - $601 PRICE + $500 STRIKE)
2) TSLA Stonk is $599, you make $1 ($100 PREMIUM - $599 PRICE + $500 STRIKE)
3) TSLA Stonk is <= $500, you make $100 ($100 PREMIUM - $500 PRICE + $500 STRIKE)
4) TSLA Stonk is ∞, you lose ∞ less $100 ($100 PREMIUM - $∞ PRICE+ $500 STRIKE)
These are the simplest of charts. Charts will have more lines than a disco bathroom once you start combining options. Then you realize that there are no lines - more on that in the future.