Difference between call and put options?

Call options - provide the holder the right (but not the obligation) to purchase an underlying asset at a specified price (the strike price), for a certain period of time. If the stock fails to meet the strike price before the expiration date, the option expires and becomes worthless. Investors buy calls when they think the share price of the underlying security will rise or sell a call if they think it will fall. Selling an option is also referred to as ‘writing’ an option.

Put options - give the holder the right to sell an underlying asset at a specified price (the strike price). The seller (or writer) of the put option is obligated to buy the stock at the strike price. Put options can be exercised at any time before the option expires. Investors buy puts if they think the share price of the underlying.

Stock will fall or sell one if they think it will rise. Put buyers - those who hold a “long” - put are either speculative buyers looking for leverage or “insurance” buyers who want to protect their long positions in a stock for the period of time covered by the option. Put sellers hold a “short” expecting the market to move upward (or at least stay stable) A worst-case scenario for a put seller is a downward market turn.

The maximum profit is limited to the put premium received and is achieved when the price of the underlayer is at or above the option’s strike price at expiration. The maximum loss is unlimited for an uncovered put writer.

An Option is a contract that gives the right, but not an obligation, to buy or sell the underlying asset on or before a stated date and at a stated price. The buyer or holder of the option pays the premium and buys the right, the writer or seller of the option receives the premium with the obligation to sell or buy the underlying asset, if the buyer exercises his right.

Based on the type of contract, options can be divided into two types.

1)Call gives the buyer the right, but not the obligation, to buy a given quantity of the underlying asset, at a given price on or before a given future date.

2)Put gives the buyer the right, but not the obligation, to sell a given quantity of the underlying asset at a given price on or before a given date. Options can be transacted both in OTC Market and Exchange Traded Markets.