The Ultimate Guide to Options Trading

Last updated: 16 October 2026 · By Spencer Li, CFTe

Let me say the awkward thing first. We do not teach options at Synapse, and my own trading is end-of-day swing trading in shares, forex and ETFs.

So why write the guide? Because every week someone asks, because the covered-call and “wheel” videos are selling a monthly income that the arithmetic does not support, and because the honest map is short. An option is a contract that gives you the right, but not the obligation, to buy or sell 100 shares at a fixed price before a fixed date. A call is the right to buy, a put is the right to sell. Buy one and the most you can lose is what you paid. Sell one and the most you can lose is, in some structures, everything. This guide covers how calls and puts actually make or lose money, what the Greeks mean in plain words, the 4 structures beginners start with and the real risk of each, and the 3 rules that would keep me alive if I ever did trade them.

How does a call actually make or lose money?

A worked example, hypothetical, with round numbers. A stock trades at USD 150. You buy a 150 call expiring next month for USD 3 a share. One contract covers 100 shares, so you pay USD 300.

The stock rallies to USD 160 at expiry. Your right to buy at 150 is now worth 10 a share, USD 1,000 a contract. You paid 300. Profit USD 700, which is 233% on the money at risk. The stock itself moved 6.7%.

Now the stock drifts to USD 153 instead. Your right to buy at 150 is worth 3, exactly what you paid. Zero. The stock was up 2% and you made nothing. And at USD 150 or below, the option expires worthless and you lose the whole 300. The stock did not fall, and you lost 100%.

Right on direction, wrong on size or time, and you still lose.

That is the whole character of a bought option. Huge payoff when the move is big and fast, a slow bleed when it is small or late. A put is the mirror image, the right to sell at a fixed price, so it pays when the stock falls hard.

What do the Greeks actually tell me?

Four letters, and only 2 of them matter on your first day.

• Delta. How much the option moves when the stock moves 1 dollar. An at-the-money option sits near 0.5, so a 1-dollar move in the stock moves it about 50 cents. It is also roughly the market’s odds that the option finishes in the money.
• Theta. What the clock costs you per day. A bought option loses value every day the stock does nothing, and the loss speeds up in the last few weeks. This is the bleed in the example above.
• Vega. How much the price changes when the market’s nervousness changes. Option prices inflate before earnings and in a panic, and deflate the moment the news lands. You can see the big move you expected and still lose money, because you bought the inflated price.
• Gamma. How fast delta itself changes. It is what makes a cheap option near expiry behave like a lottery ticket, in both directions.

A rough rule for vega that I find useful: the VIX divided by 16 is about the S&P’s expected daily range in percent. VIX at 32 means the market is pricing about 2% a day. Buy a call after the VIX has already spiked and you are paying for a storm that may be ending.

The 4 structures beginners start with, and the real risk of each

The “wheel”, which sells puts until you are assigned shares and then sells calls against them, is the second and third rows run in a loop. It is marketed as income. What it is, in plain words, is a strategy that collects small premiums in calm markets and holds the full downside of the shares in a falling one. Whether that pays a steady monthly income is a claim its sellers make, and I have not seen it survive a bear market in anyone’s audited numbers. Treat the income number as unproven until someone shows you the drawdown beside it.

Why do options accounts blow up?

Rarely because of the Greeks. Almost always because of size.

A long run of post-mortems on Reddit, from option traders who lost most of an account and came back, names the same cause every time. “Oversizing: used way more margin than I should have,” wrote one. After cutting it: “This alone made the most difference.” Another had been sizing zero-day trades at 2 to 3 times what he risked on longer-dated ones. Once he stopped, “the account isn’t bleeding for the first time in months.” A third logged 60 index spread trades against the price on the screen. His real returns came in 15 to 20% below his model, because the fills on a multi-leg order are worse than the mid.

The same thing happens in every market, and options just make it faster. A bought option cannot be stopped out at a level, so the premium you pay is the whole risk, and it has to fit your risk per trade on its own. If your rule is 1% of the account per trade, then on a SGD 50,000 account the contract costs SGD 500 or you do not buy it. No averaging down, because there is no level to average to, only a date.

The 3 rules I would trade them by

If I ever did add options to my own book, these are the rails, and they are borrowed from people who have traded them for decades rather than from my own record.

1. Only from a named place on the chart. A pullback to the moving average in a trend, the bottom of a range, a failed breakout. Read it off the daily or the 60-minute chart, never the 5-minute, because the bid-ask spread is wide and only a clearly good setup pays for it. If you cannot name the location, you have no trade.
2. Only where there is liquidity. Skip any strike with fewer than 1,000 contracts of open interest or under 300 traded a day. A thin option is one you can get into and not out of.
3. Never into a catalyst, and never past 2 months. Earnings inflate the premium and crush it on the news, so the holding window has to clear the date. And a bought option older than 2 months is a slow bleed with a story attached.

Which is to say the options trade is the swing trade, with a stopwatch. The swing-trading side is the part we do teach, and its daily routine is in the free checklist at the end of this guide.

Trading options from Singapore

Two practical things. First, options are derivatives, so before your broker opens an account to trade them, MAS rules require it to review your “knowledge and experience in derivatives”. Many brokers then give you an approval level, which decides whether you can only buy, also sell covered, or run spreads. Ask for the level you need before you fund the account, not after. Second, most retail options trading from here is on US-listed names, which means a USD account, a currency conversion, and a market that opens at 9.30 pm or 10.30 pm Singapore time. If you have a day job, that single fact rules out most of the fast strategies before you start.

FAQ

How do calls and puts make money?
A call is the right to buy 100 shares at a fixed price before a date, so it pays when the stock rises well past that price in time. A put is the right to sell, so it pays when the stock falls. Buy either and the most you can lose is the premium you paid.

Which options strategy should a beginner start with?
Most beginners start with a single long call or put on a liquid name, sized so the whole premium is a loss they can shrug off. A bought option shows how time and volatility eat value before selling enters the picture, and selling is where losses stop being capped.

Is selling covered calls really risky?
Yes, in a way the premium hides. You keep the full downside of the shares and cap the upside, and on shares you want to keep for years you have sold away the few weeks that make most of the return. The premium is small compared with either.

Can selling options pay a steady monthly income?
It can pay small premiums in calm markets, and it holds the full downside of the shares in a falling one. Nobody selling the income has shown me the drawdown beside it, so treat the monthly figure as a claim, not a fact.

Does Synapse teach options?
No, we do not teach options at the moment. We teach end-of-day swing trading in shares, forex and ETFs, and this guide exists because the chart-reading and the sizing are the same whichever product you use.

Go deeper

This guide gives you the honest map. If you would rather start with what we do teach, the free 15-Minute Swing Trader’s Checklist has the daily routine, the questions to ask before every trade, and the five rules that keep you in the game. Enter your email and we’ll send it over:

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About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe) with 15 years of trading across stocks, forex, crypto, commodities, and bonds. His trade log is public: every trade since April 2024, dated, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital, and isn’t suitable for everyone. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.