There is so much information that you can learn on options. You can hedge, leverage, and all the other things mentioned that SL and myself have posted. However, try not to get to overwhelmed with all the different terms. If you learn calls and puts, which is fairly straight forward then you can make lots of money just doing that. Make sure you understand the strike price and expiration date. If you let your options expire and you are in-the-money by at least 5 cents then you have to purchase the shares. (You can make a phone call to your broker Friday before 4:15 Eastern time and tell them you don't want the option to execute, but then you lose everything you put into it.)
For example say you purchase the 85 Call contracts on AAPL for 2 dollars per share. So that would be 200 dollars per 100 shares plus fees and commision. Say you put 5000 dollars into this call option and it expires on Feb 17th. So 5000/200 = 25 contracts or 2500 shares. If you let the contract expire in-the-money then you have to purchase 2500 shares of AAPL for 85 dollars per share. 2500*85 = 212,500 dollars. So your account automatically on Monday Feb. 19th purchases 2500 shares of AAPL for you. When you open your account on Monday you will see a margin call for 207,500 dollars assuming you only had 5000 dollars in your account. This is not always bad as long as the stock does not drop more then 2 dollars, but for every dollar it moves after the shares have been purchased you lose or gain 2500 dollars. If it drops more then 2 dollars then you actually owe more then you have. This is why it is important to sell your shares before expiration if you are in-the-money unless you have the cash to cover your shares.
CALL or PUT at your own risk. I offer opinions and nothing else. Good luck.
