Can someone explain options as if I was a 5 year old?

Options allow you to get leverage, meaning in this case that you’re controlling more shares than you’d otherwise be able to buy.

A call contract allows you to buy 100 shares at the strike price, and you just have to pay a premium for that guarantee. You’d do this if you expect the security to go up in value before the expiration date, because you’ll be locking in a better price and so the contract is essentially worth what you would make selling those cheaper shares at current market value.

A put contract is just the inverse. You pay premium for the right to sell 100 shares at a give price, because you think the price will go down.

There’s a lot more to it, but that’s the gist.

/r/wallstreetbets Thread