Imagine getting 100 coupons that let you buy watermelons for $1 (premium) each.

• If a year later (expiration date) the price of watermelons is $2 (strike price), then you can buy them for $1 and then sell them at the market for $2 and make a $1 profit for each watermelon.
• You can also sell your coupons for a higher price. (close)
• If the price of watermelons goes down to $0.50, then your coupons are useless, because you could just buy it for $0.50 yourself. (Options expiring worthless)
• You also don’t have to sell the watermelons you buy with the coupons if you don’t want to, you can hold on to it if you think the price will go higher. (Exercise options)

Now replace ‘coupons’ with ‘calls’, ‘watermelons’ with ‘SPY’, ‘$1’ with ‘$239.5’, ‘a year’ with ‘10 Mar 2017’. BOOM!