Don't kid yourself. Options aren't nearly as complicated as a ER procedure. It's been around for centuries. I simply can't fathom why anyone can't understand what buying "option to do something" means.
Teaching options to absolute beginners is a real challenge. They often come from developing nations far from the financial centers of New York City (Otumwah Ohio, Hokie Oklahoma, etc.). Basic terminology must be used, often starting at the very beginning since there's often no common language with which to explain the basics. Here are some basic tips: 1) Carefully choose what you present. Risk graphs, white papers, alogrithmic models, technical words, sophisticated strategies, etc. will glaze their eyes over. Pictures of BMW's, Ferraris, mansions and exotic vacation destinations will grab their attention. 2) Do not assume familiarity with financial concepts. This is rather obvious but often ignored by many teachers. Do not assume that your friends are familiar with the language of finance. They may not have had the type of education that involves charts and representations. By keeping things visual (pictures) you will be appealing to learning styles that students are sure to have acquired in everyday life. So forget pie charts. And pi as well. Show pictures of pie... apple, cherry, lemon meringue, whatever. No one can say no to a huge slice with a large scoop of melting ice cream on top. 3) Use exaggerated visual gestures. For example, pointing to yourself and saying, "I am professorkev and I know what I'm talking about" helps them to know who to pay attention to. Always reinforce who their leader is. Vigorously jumping up and down will keep them awake and making your student repeat this many times helps them understand who you want them to respect and adore. 4) Don't confuse them with more complex langauge. Use exaggerated gestures to demonstrate points. Use your hands. Spread them apart as far apart as you can to demonstrate that the profit you made was as big as the fish that you caught. 5) Try to pick up a few phrases of the learner's native tongue. This is purely a psychological trick to ingratiate yourself yourself with them and make you feel comfortable because they're smiling at you. If you put yourself on the line by expressing the desire to learn a few phrases of their native language, you can go a long way towards building a rapport which will help them feel more at ease in your learning sessions. If you have difficulty with this, a few common phrases will always do. "Would you like fries with that?" is always a good start. 6) Before attempting this, make allowances for the different levels of your beginners. Most will all have had some exposure to basic finance at some point in the past and this may cause some special problems for you... "insufficient funds, payment overdue, loan application rejected, foreclosure notice." Some learners will really know more than they admit and, with the passing of time, they might even have a future here on ET, boasting of grandiose profits, top secret money printing strategies and the right to teach beginners how to invest in financially healthy and recoverable companies. Good luck!
I like this explanation This topic does remind me of when I started in the finance industry as a futures broker, when people would ask what I did all I would get was a blank stare when I tried to explain the job. I then remembered the movie Trading Places, so when people would ask what I did I would ask if they had seen the movie, if they said yes then I would say thats what I do! If they hadnt I would say I was a stock broker.
I usually break it down to 2 choices: 1. Waste time trying to explain options to people who ask out of casual interest and have no desire to really listen to the answer; 2. Keep doing what I am doing and not waste my time trying to explain it unless someone shows a minimal effort to do some research and learn about it and that has not happened yet. I usually end up with choice #2 because most of my friends think options are too risky and no one should use them and they are the root cause of all financial evil. Why waste your time trying to talk to a wall?
i explain farmers selling futures on their corn,every one has heard of farmers and corn so they aready know 2 of the 3 things you are talking about