Difference between call and put option selling


Difference between call and put option selling


Short selling and put options are essentially bearish strategies used to speculate on a potential decline in a security or index, or to hedge downside risk in a portfolio or specific stock.Short selling involves the sale of a security that is not owned by the seller, but has been borrowed and then sold in the market. The seller now has a short position in the security (as opposed to a long position, in which the investor owns the security).

A call option gives its buyer the option to buy an agreed quantity of a commodity or financial instrument, called the underlying asset, from the seller of the option by a certain date (the expiry), for a certain price (the strike price). A put option gives its buyer the right to sell the underlying asset at an agreed-upon strike price before the expiry date.The party that sells the option is called the writer of the option. The option holder pays the option writer a fee — called the option price or premium.

These are call options and put options. Likewise, there are also two sides to every option trade. Buy low, sell high -- blah, blah, blah. Once you do, basic options strategies tend to present limited difference between call and put option selling potential -- usually just the amount you paid to buy the option contract -- and unlimited upside reward. DefinitionListed as part of a each option contract is a strike price and expiration date.

You can exercise your option once the underlying security hits the strike price, however, you must do this before the option expires. At expiration, the option ceases to exist and no longer has value. One option contract gives you the right to buSelling Options in the Futures and Commodities Markets.Selling options is a little known strategy to new commodity traders, but it is widely used among professional traders.

If an investor is bullish, she can.




Difference between call and put option selling

Difference between call and put option selling


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