1What is an option?
An option is a contract that gives you the right (not the obligation) to buy or sell 100 shares of a stock at a specific price (the "strike") by a specific date (the "expiration").
You pay a fee called the premium for that right. If the trade moves in your favor, the option becomes worth more and you can sell it (or exercise it). If it doesn't, you lose only what you paid.
Key insight: options give you LEVERAGE (controlling 100 shares for a fraction of the cost) but they EXPIRE. Stocks last forever. Options die.
2Calls vs puts — the two basic bets
CALL = a bet that the stock will go UP. You profit if the stock rises above the strike price + premium you paid.
PUT = a bet that the stock will go DOWN. You profit if the stock falls below the strike price − premium you paid.
Example: NVDA is at $500.
→ You think NVDA will rise to $520 by Friday. Buy a NVDA $510 CALL for $300.
→ If NVDA hits $520, your option is worth $1000+ (you can sell for ~3x).
→ If NVDA stays at $500, your option expires worthless and you lose the $300.
The brain's prediction translates directly: if it says "NVDA 67% LONG," you'd consider a CALL. If it says "TSLA 30% LONG" (i.e. 70% SHORT), you'd consider a PUT.
3Why use options instead of just buying the stock?
Three reasons:
- Leverage — controlling 100 shares of NVDA ($50,000) might cost only $300 in option premium. Your $300 can return 5x-10x if the stock moves a few percent.
- Defined risk — when you BUY an option, the max you can lose is what you paid. No margin call. No surprises.
- Speculate on direction without huge capital — if you only have $5,000 and want exposure to AAPL ($230/share = $23,000 for 100 shares), an option lets you participate.
The flip side: options can go to ZERO. With stock, even if AAPL drops 30%, you still own shares worth something. With an option, if AAPL doesn't move ENOUGH in YOUR direction by expiration, you lose 100%.
4What an option actually costs
An option's price (called premium) is made of two parts:
- Intrinsic value = how much it's already "in the money." A NVDA $500 call when NVDA is at $510 has $10 of intrinsic value.
- Time value = how much extra people are willing to pay because there's still time for the stock to move. More days until expiration = more time value.
Premium is quoted per share but options cover 100 shares. So a "$3.00 call" actually costs $300.
NVDA $510 call expiring next Friday, NVDA currently at $500:
→ Intrinsic value = $0 (it's out of the money)
→ Time value = $3.00 (people are paying for the chance NVDA moves up to $510+ in time)
→ Total premium = $3.00 × 100 shares = $300
5Expiration: the silent killer (theta)
Every day that passes, an option loses some time value. This decay is called theta. It accelerates as expiration approaches.
Critical: options with less than 7 days until expiration lose value RAPIDLY. If you're long an option and the stock stays flat, you lose money every single day even if nothing happens.
This is why the brain's predicted horizon matters. The brain predicts probabilities at the SHORT horizon (~10 min) and MID horizon (a few hours). For options:
- Day-trading the brain's short-horizon picks → use 0DTE options (same-day expiration) or weekly options expiring this Friday
- Holding overnight → use options expiring 2-4 weeks out (gives stock time to move + less theta decay)
- Never: buy 0DTE options after 2pm ET unless the brain is high-conviction. Theta destroys you.
6Picking a strike (ITM / ATM / OTM)
Three categories of options based on strike relative to current price:
- ITM (In The Money) — strike below current price for calls (or above for puts). Already has intrinsic value. Less leverage, higher probability of payoff. Behaves more like the underlying stock.
- ATM (At The Money) — strike at or very close to current price. Maximum leverage on small moves. Best gamma (sensitivity to price).
- OTM (Out of The Money) — strike above current price for calls. Cheap, all-time-value, requires bigger move to profit. Lotto-ticket potential but high failure rate.
The rule of thumb for the brain's signals:
- Brain says 60-70% confident → buy slightly OTM (1-2 strikes out)
- Brain says 70-80% confident → buy ATM
- Brain says 80%+ confident → buy ATM or slightly ITM for safety
7How to use the brain's signals for options
The brain (and specifically brain-bet.html) outputs:
- Probability (e.g. NVDA: 67% LONG)
- Suggested position size (e.g. "200 shares = $5,000")
- Entry / Stop / Target levels
To translate this to options:
- If brain says LONG → buy a CALL. If SHORT → buy a PUT.
- Pick strike based on confidence (see section 6).
- Pick expiration based on horizon:
- Short-horizon trade (10 min - 1 hour) → 0DTE or this-Friday weekly
- Multi-day setup → 2-4 weeks out
- Use the brain's recommended $ risk from make-money.html as your option premium budget. If the brain says "risk $200 on NVDA," that's your max premium.
- If the option premium > your risk budget, either pick further OTM (cheaper) or skip the trade.
Brain says: NVDA 70% LONG, suggested risk $200
NVDA at $500
→ Buy 1 NVDA $505 CALL expiring this Friday for $180
→ That's your max loss. Max gain = unlimited if NVDA rips.
→ Set a mental stop: if NVDA closes below $498, the trade thesis is wrong → close the option.
8Position sizing (the most important section)
The brain's edge means nothing if one bad trade wipes you out. Sizing is where most retail traders blow up.
The Kelly Criterion says: to maximize compound growth, risk
(prob × win - loss_prob × loss) / win of your bankroll. But Kelly assumes your probability is PERFECT. Real estimates are noisy.
Use quarter-Kelly (multiply by 0.25). That's what
make-money.html calculates for you automatically, scaled further by the brain's uncertainty.
Rules of thumb:
- Never risk more than 5% of bankroll on a single options trade
- Never have more than 10% of bankroll at total risk across all open positions
- If you've lost 3 trades in a row, cut size in half until you win one
- If account drops 15% from peak, stop trading for the week
The single biggest mistake retail traders make is sizing positions based on conviction or emotion instead of math. "I really feel this one" is the language of someone about to blow up their account.
9When to take profit and when to cut a loser
Have these rules WRITTEN DOWN BEFORE entering the trade:
- Profit target — typically 50-100% gain on the option premium. So if you paid $200, sell at $300-400. Don't get greedy.
- Stop loss — either:
- Underlying price hits your stop level (e.g. NVDA closes below $498 → exit the call)
- Option loses 50% of premium (e.g. paid $200, now worth $100 → exit)
- Time stop: if the option has lost 25% but the underlying hasn't moved, the brain's thesis is invalidating slowly. Cut it.
- End-of-day rule — never hold a 0DTE option overnight. It expires worthless.
The discipline that separates winners from losers: set the stop BEFORE you enter, then HONOR IT. Most blow-ups come from "I'll just give it more room" or "it has to come back."
10What NOT to do
- Don't sell naked options (collect premium without owning the underlying). Theoretically unlimited loss. Wait until you've made money for 6+ months before learning option SELLING strategies.
- Don't trade earnings unless intentional. Options around earnings have wild IV crush (premium drops 30%+ after report even if you predicted direction correctly). The brain doesn't account for earnings calendar — check it yourself.
- Don't average down on losing options. If a call dropped 50%, the trade is wrong. Adding more capital to wrong is how accounts blow up.
- Don't buy 0DTE after 2pm ET unless brain says 80%+ confident. Theta destroys you fast in the last 2 hours.
- Don't trade through the open (9:30-10:00 ET). Spreads are wide, vol is high, the brain's hourly-perf tracker often shows this hour as the WORST for predictions.
- Don't override the auto-pause. If TradeTrust drops below 40 and the brain auto-pauses, the data is telling you something is wrong. Listen.
11Cheat sheet (printable)
Brain says LONG
→ Buy a CALL option
- 60-70% confidence → 1-2 strikes OTM
- 70-80% confidence → ATM
- 80%+ confidence → ATM or slight ITM
Brain says SHORT
→ Buy a PUT option
- Same strike-by-confidence rules but for puts
Position size
$ at risk = bankroll × (kelly × confidence × 0.25)
- Open /make-money.html for auto-calculated sizes
- Max 5% per trade, 10% total across all positions
Expiration
Short-horizon → 0DTE / weekly · Multi-day → 2-4 weeks out
- Never buy 0DTE after 2pm ET unless 80%+ conviction
Exits
Take profit at +50-100% · Cut loss at −50% premium or stop hit
Skip the trade if
- Brain confidence < 60%
- Trade trust score < 60/100
- BSS < 0 (brain isn't learning)
- Earnings within 3 trading days (unless intentional vol play)
- Account down 15%+ from peak this week
📍 Where to go from here
You have everything you need. The brain has been pre-trained on 60 days of real market data and continuously updates as new data flows in.
Disclaimer: Options involve substantial risk. Nothing on this site is investment advice. Past performance does not predict future results. You can lose 100% of any options premium. Trade only money you can afford to lose entirely. Consult a licensed financial advisor.