Focusing on calls and puts, essential components of options trading.
Call Options
A call option gives you the right to buy a stock at a specified strike price before the expiration date.
- Bullish Strategy: Used when you anticipate the stock price will rise.
- Example: Buying a call option with a strike price of $50. If the stock rises to $60, you can buy it at $50 and sell at market price for a profit.
Put Options
A put option gives you the right to sell a stock at a specified strike price before the expiration date.
- Bearish Strategy: Used when you expect the stock price to fall.
- Example: Buying a put option with a strike price of $50. If the stock falls to $40, you can sell it at $50 and pocket the difference.
Understanding these basics will help you in your journey to learn to trade stock options effectively, and this article takes a deeper dive – read The #1 Options Trading Hack For Stock Index Options Traders.
