Types of Options
Call and Put options
There are two types of options
Call and Put options. These two options function the same except for the opposing market conditions.
Call Option
Call option gives the buyer the right to BUY an underlying asset at an agreed (specified) price on and before the pre-determined date. Naturally, you want to believe that the underlying asset value will appreciate in the near future. The purchase price had been fixed or locked in. You will profit when the future value is higher.
Put Option
Put option gives the seller the right to SELL an underlying asset at an agreed (specified) price on and before the pre-determined date. In this case, you want to believe that the underlying asset value will depreciate in the near future. The sale price had been fixed or locked in. You will profit when you can buy at lower value in the future.
Put Option
Put option gives the seller the right to SELL an underlying asset at an agreed (specified) price on and before the pre-determined date. In this case, you want to believe that the underlying asset value will depreciate in the near future. The sale price had been fixed or locked in. You will profit when you can buy at lower value in the future.
In Summary
You will buy Call options if you are betting on the asset price to increase. On the contrary, you want to buy Put options if you worry the asset price could drop. Note that in both cases you are buying the options. Buying the options allow you to do something – which is to buy or sell the asset under the contract.
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