"Cirrus seven-mike-x-ray, runway zero-three right, cleared for the option."

That was Peachtree Tower talking to me as I turned final for Runway 3 right at Peachtree–DeKalb Airport, just north of Atlanta.

If you're not a pilot, it probably sounds like gibberish. But it's one of my favorite radio calls to hear.

When the tower clears you "for the option," it means you don't have to make a final decision yet.

You can land and come to a full stop. You can touch down and take right back off. Or you can fly low over the runway and climb out without touching the pavement at all.

As the pilot, you get to choose what happens at the very last moment based on what you see out the windshield.

After some time away from flying, I got back in the left seat this fall. I'm now working toward my instrument rating.

Every time I hear "cleared for the option," I think about the market. Because that call is almost a perfect description of what an option gives you as a trader.

I’ll show you what I mean using a real-world example.

More Than One Way to Bet on Amazon

It’s a busy week for the stock market. The Federal Reserve announces its latest rate decision this afternoon.

On top of that, roughly a third of S&P 500 companies report earnings this week, including some serious heavy hitters.

Microsoft and Alphabet report today after the close, and Amazon takes its turn tomorrow night.

Most investors looking at Amazon only have one decision to make. They either buy the stock or they don't.

If you buy 100 shares of Amazon at its recent price near $250 per share, that would cost about $25,000.

Options traders, on the other hand, have several different choices. And those choices aren’t nearly as expensive as buying the stock outright.

But before I go any further, let’s make sure we’re all on the same page.

There are two basic types of options contracts.

A call option gives you the right, but not the obligation, to buy a stock at a set price (the "strike") before a set date. Calls gain value when the stock goes up.

A put option gives you the right, but not the obligation, to sell a stock at a set price before a set date. Puts gain value when the stock goes down.

You pay a price for that right, called the "premium." (Or as you'll see in a minute, you can be the one who collects the premium.)

With those two tools, here are five different ways to approach Amazon's earnings, depending on what you think will happen.

Choice #1: "I think Amazon is heading higher."

If you think shares of Amazon will go up, you could buy a call option. I like in-the-money calls, which are just calls with a strike price below where the stock trades today.

A $230 strike call expiring on Dec. 18 costs about $30, or $3,000 for one contract covering 100 shares.

Because it's already in the money, this call moves roughly $0.75 for every $1 Amazon moves. So you get stock-like gains for a fraction of the cost of owning the shares.

The tradeoff is that unlike shares, your call option has an expiration date. It can’t sit in your account forever, and it loses a little value each day that passes.

Choice #2: "I think Amazon is going to disappoint."

If you think shares of Amazon will go down, you can buy a put. If Amazon falls after earnings, your put gains value.

This is a cleaner way to bet against a stock than shorting it.

When you short shares, your potential loss has no ceiling if the stock rallies. When you buy a put, the most you can lose is the premium you paid.

No margin calls, no sleepless nights.

Choice #3: "I'd love to own Amazon, just at a lower price."

This is where you get paid to buy a stock you want to own already.

You can sell a put with a strike price below today's price. Say you sell a $230 put and collect $6 per share in premium.

If Amazon stays above that strike, you keep the cash and walk away. If Amazon drops below it, you buy the shares at the strike price.

Your real cost is even lower, because you already pocketed the premium.

Either way, you were paid for your patience. (You do need to keep enough cash set aside to buy the shares if that happens.)

Choice #4: "I already own Amazon, and I'm a little nervous."

You have two good tools here. A protective put works like an insurance policy.

If earnings go badly and the stock drops, your put rises in value and offsets part of the damage. You pay a premium for the protection, just like any insurance.

A covered call goes the other direction. You sell a call against shares you own and collect income.

If Amazon rallies past your strike, your shares get "called away" at a profit. If it doesn't, you keep the premium and your shares.

Choice #5: "A big move is going to happen… I just don't know which way."

You can buy a call and a put at the same strike. Traders call this a "straddle."

If Amazon makes a big move in either direction, one side can make more than both cost you.

But here's what most new traders don't realize. The options market already knows a big move is coming. Right now, Amazon's options are pricing in a move of about $19 after earnings.

Premiums swell before the announcement and shrink fast once the news is out.

So for this trade to pay off, Amazon has to move more than the market already expects. That's why this is the hardest of the five to get right.

It's also a useful habit no matter which choice you pick: before you place any earnings trade, check the expected move.

Now Guess Which One I'm Using

In the interest of full disclosure, I hold a bullish Amazon options position in my Income Alliance portfolio right now.

So here's a little challenge. Which of the five choices above do you think I'm using? (Hint: it lives in a portfolio built for aggressive, but still reliable, income.)

Send me your guess at AskZach@paradigmpressgroup.com.

I'll reveal the answer next week and explain why I chose it over the other four. And I’ll even show you how the trade held up through tomorrow’s earnings.

Until then, I’ll leave you with one final thought...

Good pilots never force a landing they don't like. If the approach doesn't look right, you go around and try again.

Trading works the same way.

You don't have to place a trade on every earnings report, and you don't have to commit to one way of playing a stock.

Options let you choose the approach that fits what you see, and change course when the picture changes.

That flexibility is why I love trading options. And it's what I'll be showing you, one strategy at a time, in the weeks ahead.