For many investors, it’s appealing to buy a cheap stock and buy as many shares as you possibly can. You sound pretty good at a cocktail party, right? In the options world, that’s not always the case. Don’t wait until it’s too late, and too costly, to learn the basics of options pricing.

If you can understand how the pricing for a car insurance policy works, it can go a long way to understanding how options pricing works.

Car insurance, in a nutshell, is based on the chance of something happening in the future. Like a fender bender during rush hour traffic or another unfortunate event that could happen behind the wheel. Essentially, option contracts are based on the probability something is going to happen in the future—like the rise or fall of a particular stock options quote.

Watch this video to learn more.

Did You Know?

If you think option trading can be a bit tricky to grasp, you’re not alone. There are plenty of communities that bring option traders together to discuss things like current market outlook and option trading strategies.

Listen to the latest episode of the Options Playbook Radio, attend one of our free, weekly options trading webinars, or ask Brian Overby, our “option guy,” anything by emailing him directly.

Learn more about Ally Invest

Ally Invest offers products tailored to customers who prefer to manage their own trading as well as those who prefer a hands-off investing.  Just remember, all investing involves risk, including loss of principal.  Ally Invest products are NOT FDIC INSURED, NOT BANK GUARANTEED, and MAY LOSE VALUE. Here are 8 things to know before you trade.

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