Whats the Difference Between a Call Option and a Put Option?
If you have dabbled in the investing world for any period of time, you have undoubtedly heard claims about people making money from stock options. However, stock options are quite different than the stock which underlies them. With a stock, there are two basic options: buy it or sell it. With options, there are contracts at many different strike prices and expiration dates. At any given time, there may be hundreds of options for each individual stock. This article will help you understand the two basic types of options: Calls and Puts. 1. What is a Call? A call option is a contract. There are two sides to this contract, and you can enter the contract on either side that you wish. The buyer of a call has the option to buy a stock if it reaches a previously agreed upon price. The seller of the call has the obligation to sell the stock if it reaches the agreed upon price. Example: Stock trades at $100 The price of the call option is $5 The Strike Price is $100 The expiration date is Janua
