Everyone asks the same question: "What should my first options trade be?" After watching thousands of beginners go through this, the answer is clear.

The Recommendation: A Covered Call

If you own 100 shares of any stock, sell a covered call. It's the lowest-risk options trade that exists, and it teaches you the mechanics of selling premium, time decay, and strike selection all at once.

If you don't own 100 shares of anything, your best first trade is a cash-secured put on a stock you want to buy anyway.

Covered Call Walkthrough

Let's say you own 100 shares of Ford (F), currently trading at $12.

Step 1: Open your brokerage options chain for Ford.

Step 2: Select an expiration 30-45 days out.

Step 3: Choose a strike price above the current price. The $13 strike is a reasonable first choice—about 8% above current price.

Step 4: Sell 1 call contract at the $13 strike.

Step 5: Collect the premium. At a $0.25 premium, that's $25 cash deposited into your account immediately.

What Happens Next

Three scenarios play out:

Ford stays below $13 (most likely): Your option expires worthless. You keep the $25 premium and your 100 shares. You can sell another call next month.

Ford rises above $13: Your shares get called away at $13. You make $100 from the stock price increase ($12 to $13) plus the $25 premium. Total gain: $125. You just can't participate in upside above $13.

Ford drops significantly: You still own the shares (which would have dropped regardless), but the $25 premium slightly cushions the loss.

Why This Trade Is Perfect for Beginners

  • No additional capital needed if you already own the shares
  • You can't lose more than owning the stock alone
  • Immediate income from the premium
  • Simple mechanics with clear outcomes
  • Teaches time decay firsthand as you watch theta work in your favor

    • If You Don't Own 100 Shares

    Try a cash-secured put instead. Pick a stock you want to own and sell a put at a price you'd be happy paying.

    Example: Stock XYZ trades at $25. You sell the $23 put for $0.80. Either you keep the $80 premium, or you buy the stock at an effective price of $22.20 ($23 strike minus $0.80 premium). Both outcomes are acceptable.

    What NOT to Do on Your First Trade

  • Don't buy out-of-the-money weekly calls - They expire worthless 80%+ of the time
  • Don't trade earnings - Volatility crush will confuse your learning
  • Don't use more than one contract - Keep it manageable
  • Don't skip the options chain analysis - Tools like OptionsPilot help you compare strikes and expirations before committing

    • After Your First Trade

    Journal it. Write down why you chose that strike, that expiration, and that stock. After expiration, review what happened and why. This reflection is worth more than any course.

    Your first trade isn't about making money. It's about experiencing the lifecycle of an options contract from open to close. Once you've done that, everything else makes more sense.