An Options are of two
types one is call option and other is put option, let’s look at the differences
between call and put option to get a better idea about both of them –
1. A call option is one which allows the buyer of
the option to buy an agreed quantity of stock, while put option is one which
allows the buyer of the option to sell agreed quantity of stock
2. A person who buys call option is bullish on
the stock while the seller of call option is bearish on the stock....
3. Call option buyers benefits when the price of
stock rises while the put option buyers benefits when the price of stock falls.
4. A call
option buyer has the right to buy the stock even if the current price of stock
is more than agreed price between call option buyer and call option writer,
while a put option buyer can sell the stock even if the current price of stock
is less than agreed price between put option buyer and put option writer.
However under both call and put option the buyer has to pay a
premium to the seller of the option in order to have the benefits of options.
A call option gives the choice purchaser the right, but not the obligation, to buy a certain amount of stock on or before a certain date for a certain price. A put option devotes its buyer the right, but not the obligation, to deal stock on or before a certain date for a certain price.
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