Differences between call and put options
Have you decided to start trading options but don’t know whether to choose call options or put options? Compareallbrokers.com is happy to help you with this. In this article you can read what exactly the differences are between these two types of options. This will help you decide which type of option suits your situation best.
What is an option?
First of all, it is important to know what an option is. With an option, you obtain the rights to buy or sell the underlying value of securities (for example, shares) at a predetermined price. You must do this before the expiration date, otherwise your option will expire. Read extensively about the meaning of an option .
The differences between call and put options
Options come in 2 types: call options and put options. The biggest difference between the 2 is that with a call option you get the right to buy securities and with a put option you get the right to sell securities.
It is important to keep an eye on what the price value of the securities will do. This will determine whether it is wiser to choose put options or call options.
Do you think the share price will fall? Then choose put options. With these, you sell the shares for a fixed price that is higher than the share price. Do you expect the share price to rise, then choose call options. With these, you buy shares for the strike price, which at that time is lower than the share price .
Finally, put options have an additional option compared to call options. You can use put options to insure your securities against a fall in price. If the price falls, you sell the securities for the strike price. However, if this does not happen and the price remains the same or even rises, you choose to keep the securities yourself or sell them on the regular stock market.
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