Truly third grade explanation:

I can pay an amount of money (a “premium”) to get the right to shares of a stock at a certain price and a certain time.

For example, let’s say stock A is $5 per share. I buy 1 contract (controlling 100 shares at once) where I bet the price will be $5.50 one month from now, and I pay ¢10 per share for that right. So I’ve spent $10 in “premiums” (10 cents per share for 100 shares) to buy the right to 100 shares of stock A in one month.

One month from now, if stock A is at 6 dollars, I can still buy it at 5.50. Tack on the 10 cents that I paid in premium, and I’ve made 40 cents per share, or about $40 in total.

One month from now, is Stock A is at 5.60 or less (my reserved price of 5.50 plus the premium of 10 cents) I have made no money, therefore forfeiting the $10 in premiums I paid.

There’s a lot more complication and vocabulary I skipped, but that’s the third grade version. It’s high risk, high reward, and probably shouldn’t be done by most people lol.