This is a simple explanation. An example would be buying a call option on a stock that's low (like $10), if you expect to to rise. When or if it does rise (let's say $100), you'd be able to buy that stock for the call amount you paid, not that current $100. A put is almost the opposite only you're selling stock... the right to sell at whatever price you bought the put for. IE i have a put that allows me to sell that now $100 stock at $70 of it falls again to $10.
It sounds like easy money and if can be. But I gave very a simple example. These options rarely switch that hard in either direction. And I didn't mention sell options and how you don't even need to own a position to buy or sell an option. In those situations, if you sell an option to someone and that person exercises it, you obligated to follow through, even if you don't actually own.
There's an opportunity to trade your into infinite debt if you don't know how to manage your money while in the red. Theres a number of reddit stories of cacs fukking options and losing all of their families savings...or swallowing a bullet after seeing their portfolio being in a red for seven figures but only actually putting in low five figures.
Day traders and large firms can operate in the red because they have the time, knowledge and resources to do so. This shyt is the superbowl for them. They're going to win, regardless what happens...the system was made for them.
