Apple Inc (AAPL)

[Jon Barucca]

When you buy a call option contract you are paying a fee to have the right to buy the stock for a certain price anytime up to the expiration date. Each regular contract represents 100 shares. Mini contracts represent 10 shares. Pricing that you see is the fee per share.

If you buy a contract for $600 March 7 calls and pay .30 you'll be buying the right to pay $600 per share for 100 shares anytime up until March 7th, and for this right you'll pay $30. As soon as you pay that $30 it's gone forever because it's a fee you paid for the rights you got.

If the stock doesn't reach $600 by March 7th your right to purchase expires and you lose your $30. If the stock goes to $601 on March 6th, you can buy 100 shares of the stock for $60100 and sell them for $6100. Take out your $30 fee and you just turned a $70 profit on a $30 investment (less brokerage/trading fees). You don't have to actually buy and sell the stock, you can just sell the rights to buy, which is selling the option contract.

That's the very basic explanation of how call options work. You can get huge returns, but you can also lose it all. Do your own research on how options work.