Basics
Call and Put explained simply
Call = right to buy. Put = right to sell.
Core idea
What matters
A call benefits from rising prices, a put from falling prices.
The buyer has a right, the seller takes on an obligation.
Example
Stock at 100 EUR
- Long call strike 95 Benefits from rising prices. This call is ITM because the strike is below spot.
- Long put strike 105 Benefits from falling prices. At spot 100, this put is also ITM because the strike is above spot.
- OTM note A put would be OTM if its strike is below spot, for example 95 EUR.
- Shortcut Call (Long) = upside, Put (Long) = downside or hedge.
Summary
Long and short
- Call (Long) Right to buy the underlying at the strike price. Long calls benefit from rising prices.
- Put (Long) Right to sell the underlying at the strike price. Long puts benefit from falling prices.
- Option seller Sellers of calls or puts take on obligations and receive the premium immediately at the current market price.
- Call (Short) Obligation to deliver the underlying at the strike price.
- Put (Short) Obligation to take delivery of the underlying at the strike price. Enough free margin is essential.
- Example A CSP (Cash-Secured Put) is a typical short-put setup.