Type of Options
Let’s take a look at the most important concepts for this module. We know that when we talk about a contract that gives you the right to buy shares we are talking about “Call Options” and the contract that gives you the right to sell shares we are talking about “Put Options”
Let’s take a look at these two contracts;
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Calls
If you buy an equity call option, you are paying for the right to buy the underlying stock at a certain price (the strike price) and before a certain date (the expiration date).
If you purchase a call, you are considered to be long the option.
Let’s look at a standardized call contract, as an example, we will use the AAPL June 100 call. If you buy this option you will have the right to buy the underlying stock (AAPL), at the strike price (100), and until the expiration date (June)
Puts
A put is a contract that gives the option buyer the right to sell the stock. When you buy a put option, you have the right to sell the stock at a certain price (the strike price) and before a certain date (the expiration date).
If you purchase a put, you are considered to be long the option.
Let’s look at a standardized put contract, as an example, we will use AAPL June 100 put. If you buy this option you will have the right to sell the underlying stock (AAPL), at the strike price (100), and until the expiration date (June).