FIN310 · Session 13 · Options and hedging

One stock. Four ways
to use $500.

What would you do if you had $500 and one week to act on your view of NVIDIA? Start with calls and puts, work through the dollars, then commit to your own decision.

$500 starting cash$186.64 NVDA on Nov. 6Nov. 13, 2026 expiration

Play first · Warm-up

Call & Put Payoff Game

Try the original game first. See what happens to a call as the stock rises and to a put as it falls. Look for the break-even point on each graph.

Open the original options game ↗

Watch · Calls and puts

Call Up, Put Down · The Options Rap

Listen for the call and put rights and the difference between speculating and hedging. The rap uses a separate $50 strike example.

Watch on YouTube ↗

Play the local copy

Music and vocals generated with Suno AI.

Watch · 10:34

The $500 NVIDIA walkthrough

Follow the video from stock to calls and puts. Watch for the difference between payoff per share, profit on the whole trade, and ending account balance.

Use the written steps below to review the math at your own pace.

Learn · Numbered lecture

From a quote to a decision

Set the budget and read the chain

We start with $500 and the Nov. 6 NVDA close of $186.64. In Yahoo Finance, open NVDA → Options and select Nov. 13, 2026. The strike is the price written into the contract. The ask is the quoted price to buy. One standard contract represents 100 shares, so multiply the quoted premium by 100.

Nov. 6 Cboe asks for Nov. 13 expiration
Contract Ask / share Cost / contract Fits $500?

$190 call $4.80 $480 Yes

$180 put $3.80 $380 Yes

$185 put $5.60 $560 No

Yahoo Finance option chain ↗ · Cboe quote table ↗
Buy shares and keep the leftover cash

Two shares cost 2 × $186.64 = $373.28, leaving $126.72. If NVDA closes at $200, each share gains $13.36. Two shares gain $26.72, so the account ends at $526.72. At $175, the account ends at $476.72.
Follow the call graph to the right

A call gives you the right to buy at the strike. The graph shows profit per share after the premium on the vertical axis and the stock price at expiration on the horizontal axis. At $190 or lower, the call expires worthless and you lose $4.80 per share. Above $190, the line rises. It crosses zero at $194.80.

At $200($200 − $190) − $4.80 = $5.20 profit per share$5.20 × 100 = $520 profit · $500 + $520 = $1,020 balance
Follow the put graph to the left

A put gives you the right to sell at the strike. At $180 or higher, the put expires worthless and you lose $3.80 per share. As the stock falls below $180, the payoff rises. At $176.20, the payoff exactly covers the premium.

At $175($180 − $175) − $3.80 = $1.20 profit per share$1.20 × 100 = $120 profit · $500 + $120 = $620 balance
Separate “in the money” from profit

At $192, the $190 call is in the money by $2.00. Subtract the $4.80 premium and it still loses $2.80 per share, or $280 per contract. At $178, the $180 put is in the money by $2.00, but after the $3.80 premium it loses $180 per contract.
Make a choice and explain the trade-off

Shares move with the stock and have no expiration. The call and put can lose their full premiums. Cash earns zero in this exercise and avoids exposure to the price move. A short sale is another bearish trade, with borrowing and margin requirements and potentially unlimited losses. The $500 lab uses shares, a call, a put, or cash.

All option results assume intrinsic value is realized at expiration. Premiums are included. Commissions, other fees, taxes, and interest on cash are excluded.

Nov. 6 Cboe asks for Nov. 13 expiration
Contract	Ask / share	Cost / contract	Fits $500?
$190 call	$4.80	$480	Yes
$180 put	$3.80	$380	Yes
$185 put	$5.60	$560	No

Play · Predict · Return

What will you do with $500?

Test a few prices, then write down your prediction for the Nov. 13, 2026 NVDA closing price. Choose one action and explain why. When you return, see how close your forecast was and how much your decision gained or lost.

A. Explore possible closes

Practice closing price ($)

Compare the four ending balances at $200.00.

Practice results at expiration
Choice	Upfront cost	Profit / loss	Ending balance

B. Record your prediction

Saved on this device in this browser. You can edit until 4:00 p.m. ET on Nov. 13. Download a copy for your records.

C. Return after the Nov. 13 close

Look up the Nov. 13 regular-session Close for NVDA and enter that price. The lab scores your saved forecast and calculates what your chosen position would be worth.

Find the Nov. 13 close on Yahoo Finance ↗

Homework · Due with the final exam

NVDA homework · Predict a price, compare a call and a put

Start with this example prediction: “I predict NVDA will finish at $200.” With a $1,000 starting account, calculate how much you would gain or lose on each option at that price. Compare the call and put as separate trades, each starting with $1,000.

Watch the homework walkthrough

Watch on YouTube ↗

Given premiums per share for November 18, 2026 contracts
Trade	Strike	Premium per share
Buy one NVDA call	$190	$8.40
Buy one NVDA put	$180	$7.20

Use these fixed premiums for every scenario. November 18 identifies the contracts. Use the given hypothetical prices and complete the assignment now. Each contract covers 100 shares. Ignore fees, taxes, and interest.

Calculate the upfront cost
Multiply each premium per share by 100. Report what each contract costs and how much cash would remain after each separate purchase.

Fill in the call and put results

Start at $200 and repeat for each price. Subtract the premium from the payoff per share, then multiply the result by 100 for the contract profit or loss.

Complete all four calculation columns
Assumed NVDA price at expiration	Call P/L per share	Call P/L per contract	Put P/L per share	Put P/L per contract
$200	—	—	—	—
$195	—	—	—	—
$190	—	—	—	—
$185	—	—	—	—
$180	—	—	—	—
$175	—	—	—	—
$170	—	—	—	—
$165	—	—	—	—
$160	—	—	—	—

Make your own prediction and choose

Pick one price from the table and finish these sentences. “I predict NVDA will finish at $___. At that price, the call’s profit or loss would be $___ and the put’s would be $___. With $1,000, I would ___ because ___.” Choose the call, the put, or cash. Report the ending balance for your choice.

Submit the completed table, one worked call calculation, one worked put calculation, and your decision with the final exam.

End of Session 13

Complete the NVDA homework and submit it with the final exam.

Optional enrichment

Advanced Options Trading for Finance Majors

Suggested for finance majors who want more practice with option chains, hedging, and trading strategies. Everything below is optional.

Optional practice · Protective puts and the historical NVDA chart

1 · READ THE STOCK CHART

NVDA over one month

Daily closing prices, Oct. 7–Nov. 6, 2026. Each dot is one trading session.

Oct. 7 close

$237.47

Nov. 6 close

$186.64 · down 21.4% over the period

Daily closes in U.S. dollars. Hover over a dot for the date and closing price.

Discuss. On Nov. 5, NVDA closed at $181.60. It bounced to $186.64 the next day. If you own it, what risk are you worried about? If you expect the bounce to continue, how far must the stock rise before a call earns money?

Source: Yahoo Finance · NVDA historical data.

2 · READ THE OPTION CHAIN

Find the strike, the ask, and what’s in the money

Open the NVDA options chain on Yahoo Finance ↗

Write down the stock price shown on Yahoo. In the expiration dropdown, choose a date and keep it the same for calls and puts. For this historical lab, we use Nov. 13, 2026. If that date is unavailable, pick any listed expiration for your live observation.
Look in Calls and Puts for the Strike column. A call gives its buyer the right to buy at the strike. A put gives its buyer the right to sell at the strike.
Find Bid and Ask. The bid is the price quoted to buy the option from you. The ask is the price quoted to sell it to you. Use the ask to estimate the cost to buy one contract. Last Price is a previous trade and may differ from the ask.

Fixed practice snapshot. Nov. 6, 2026 quotes for the Nov. 13 expiration. Compare moneyness with the Nov. 6 regular-session stock close of $186.64. Live Yahoo quotes and available expirations can change.

Strike	Call bid	Call ask	Call status	Put bid	Put ask	Put status
$185.00	$7.35	$7.40	ITM	$5.50	$5.60	OTM
$187.50	$5.95	$6.00	OTM	$6.65	$6.70	ITM
$190.00	$4.70	$4.80	OTM	$7.90	$7.95	ITM
$200.00	$1.48	$1.50	OTM	$14.40	$14.80	ITM

ITM = in the money. At $186.64, the $185 call is ITM because it lets you buy below the market. The $190 put is ITM because it lets you sell above the market. ITM describes the relationship between strike and stock price. Profit also depends on the premium.

Source: Cboe · NVDA delayed quotes. Quotes are per share. This lab assumes one standard contract covers 100 shares, a purchase at the snapshot ask, and no fees or taxes.

3 · CHOOSE, THEN TEST YOUR DECISION

Two students. Two goals.

A. You own 100 shares and worry NVDA will fall

Your shares are worth $18,664 at the reference close. You want to keep them through Nov. 13, but want downside protection. One $185 put costs $560 at the quoted ask.

Which action fits your goal?

Choose an action to get feedback.

B. You expect a rebound but have only $500

You own no NVDA shares. Buying 100 shares costs $18,664. One $190 call costs $480 at the quoted ask, and two shares cost $373.28.

Which trade-off would you accept?

Choose an action to get feedback.

What if NVDA closes here at expiration? $175.00

If you own 100 shares	Gain/loss vs. $18,664
Sell now and hold cash
Keep stock only
Keep stock + $185 put

If you start with $500	Gain/loss at expiration
Buy two shares
Buy one $190 call
Keep cash	$0.00

Show the formulas and the trade-offs

Stock only: (expiration price − $186.64) × 100. Selling at the reference price gives zero gain or loss from that point forward.
Protective put: stock gain/loss + max($185 − expiration price, 0) × 100 − $560. Below $185, the position’s net floor is $179.40 per share after premium, or a $724 loss from the starting value.
Long call: max(expiration price − $190, 0) × 100 − $480. Break-even at expiration is $194.80. Buying the call costs $480. Exercising it to buy the 100 shares costs $19,000 in addition to the premium. A holder may instead sell the option to close before expiration.

Exit ticket · explain it in your own words

At $186.64, which is ITM at the $190 strike, the call or the put? Why?
At $175, how much loss does the protective put save compared with keeping the shares unhedged?
At $192, the stock is up and the call is ITM. Why does the call buyer still lose money?

Check your answers

1. The put is ITM because its strike is above the stock price. 2. The stock alone loses $1,164, and the stock-plus-put position loses $724. The hedge saves $440. 3. The call pays $200 but cost $480, so it loses $280.

0) Options 101 — fast, plain-English

Call = right (not obligation) to buy a stock at a strike by an expiration.
Put = right to sell at the strike by expiration.
Buyer pays the premium (max loss = premium).
Seller (writer) collects premium but takes on obligations (risk can be large).
Greeks (intuition only): delta ≈ directional sensitivity; theta ≈ time decay; vega ≈ IV sensitivity; gamma ≈ how delta changes.

Why use options? Hedge (protect a stock) • Express views with limited capital • Generate income (covered calls). No heavy math needed here—just structure.

1) Option chain — how to read

Pick columns to explain:
Bid / Ask
Open Interest (OI)
Volume
Implied Vol (IV)
Delta

—

Where is this? Your broker’s “Option Chain” page. Equity options in the U.S. are generally multi-listed and clear through the OCC; you don’t pick an exchange manually—your broker routes to Cboe/NYSE Arca/Nasdaq PHLX etc. for best execution.

2) Picking expiration (DTE: days-to-expiry)

DTE (days):

1–7~30–60180–365+

—

Rules of thumb:

Hedges: pick more time (e.g., 60–180d or LEAPS for long horizon). Less theta burn.
Event trades: short DTE can focus exposure but theta + IV crush risk is high.
Students: avoid ultra-short weeklies until you understand decay & IV.

2.5) Market data — price, chains & quick estimator

Quick pick Or type any ticker

Last: — Change: — source: Stooq daily (csv)

Yahoo — Quote Yahoo — Options Nasdaq — Option Chain CSV (Stooq)

Quick call/put estimator (Black–Scholes)

Spot S₀
Strike K
DTE (days)
IV (σ, %)
r (%, annual)

Call (theo): —

Put (theo): —

At-expiry model (no dividends). Use links for *actual* chains.

3) Strategy picker — payoff lab (at expiration)

Underlying price now (S₀):
Call strike Kc / premium Pc:
Put strike Kp / premium Pp:

Long Call
Long Put
Protective Put (Stock + Long Put)
Covered Call (Stock + Short Call)
Zero-Cost Collar (Stock + Long Put − Short Call) assume net ≈ $0

Lines show P/L at expiration (before fees/taxes).

Interpretation: Long options have limited loss (premium) and convex upside/downside. Adding a put caps downside; selling a call caps upside to fund that protection (collar).

4) Hedge a stock — protective put & zero-cost collar

Protective put (own shares + buy put):

Floor set near the put strike (minus the premium paid).
Upside remains open.
Use for: known downside risk windows, sleep-at-night protection.

Zero-cost collar (own shares + buy put − sell call):

Put premium funded by the call you sell → ≈ $0 net.
Downside limited, but upside capped at call strike.
Use for: protect while you’re willing to forgo gains above a target.

Heads-up: “Zero-cost” depends on IV/skew & chosen strikes; could be net debit/credit. Assignment risk exists if short call finishes ITM.

5) Speculation — how calls/puts are used

Bullish: Long call (defined risk), or call debit spread (buy call, sell higher-strike call to reduce cost).
Bearish: Long put, or put debit spread.
Event: Short-dated options magnify theta/IV risk. IV crush after earnings is common.

Avoid (beginners): naked short calls/puts (undefined/large risk), complex multi-leg credit strategies without risk caps, over-sizing positions relative to account.

6) What to watch out for

Liquidity: prefer tighter bid/ask, decent OI/volume.
Time decay (theta): faster in short DTE & OTM contracts.
IV changes: IV up helps longs (vega +); IV down hurts.
Assignment/exercise: U.S. equity options are mostly American-style (can be exercised early). Dividends matter for early call exercise.
Commissions/fees: multi-leg strategies = more fees.

Broker differences: some default to “net debit/credit” tickets; confirm legs, strikes, quantity, and that it’s a defined-risk strategy.

7) Futures vs. Options — which is riskier?

	Futures	Options (long)
Exposure	Linear (up/down 1:1)	Convex (right, not obligation)
Max loss	Large/uncapped without stop; margin calls	Premium paid
Capital	Margin (varies; can be high)	Premium (lower $ outlay)
Sensitivity	No Greeks; direct delta	Greeks (delta, theta, vega, gamma)
Who should use	Hedgers & pros comfortable with margin	Hedgers/specs who want defined risk

Answer: For a buyer, options are typically less risky than futures (max loss = premium). For a seller, options can be more risky than futures (e.g., naked short call ≈ unlimited risk). Strategy matters.

8) Should students trade options?

Safer ways to learn:

Paper trade first; log your thesis & risk.
Start with defined-risk only (long options, debit spreads).
Size small (<1%–2% risk of account per idea).

Not recommended: naked short options, event-lottery weeklies, martingale sizing. If you don’t know how IV, theta, and assignment work—pause.

Ready to check your understanding?

15 quick questions • no math • takes just a few minutes.

Start the Quiz

Call & Put Payoff Game

Call Up, Put Down · The Options Rap

The $500 NVIDIA walkthrough

From a quote to a decision

Set the budget and read the chain

Buy shares and keep the leftover cash

Follow the call graph to the right

Follow the put graph to the left

Separate “in the money” from profit

Make a choice and explain the trade-off