Basics of Options Trading FAQs

How buying a put option is different from selling a call option ?

The Call Option allows you to purchase the underlying at a specific price and for a certain period of time, but not the obligation. The Put Option gives you the option to sell the underlying at a specific price and within a defined time.

If you are bearish and want to make a profit from the downturn in the price of an underlying, you can either sell or buy a Call Option.

The difference between buying and selling a call option

Selling a Call Option earns you a premium

To buy a put option, you pay a premium

Your profit is only as high as the premium you receive.

Profit is endless

If the price of the underlying increases significantly, you can lose everything.

Your losses are limited by the brokerage fee paid and the premium you paid.

 


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