You can think of an option just like an insurance contract: If I think a stock may go up, I buy the right to purchase it at stated future price. The reason I'd do this is because the price I pay is at a discount to that future price, in exchange for taking on the risk that my option may expire worthless if the stock doesn't reach my target. Selling options is similar: You're selling insurance to other people, who wish to capitalize on future market conditions. What makes options more complex than, say, futures, is that the price of an option changes due to many factors: variations in the underlying's price, the advance of time towards the expiration date, and changes in volatility that roughly reflect people's aversion to risk. John
Oh, you're not fumb, fon't be so fard on yourfelf, my food man. (insert smiley emoticon and I couldn't resist apology).