Call Option vs Put Option
The right to buy 100 shares at a set strike price before expiration. The right to sell 100 shares at a set strike price before expiration.
What is the difference between Call Option and Put Option?
Call = right to buy, bullish for the buyer. Put = right to sell, bearish for the buyer.
| Call Option | Put Option | |
|---|---|---|
| In one line | The right to buy 100 shares at a set strike price before expiration. | The right to sell 100 shares at a set strike price before expiration. |
| Example | A $55 call costing $2 ($200 per contract) on a $50 stock breaks even at $57 by expiration. | Own 100 shares at $50 and buy a $45 put for $1.50 - a floor at $45 for $150, expiring on a set date. |
| Unit | Securities & Instruments | Securities & Instruments |
| Series 65 | Section 2: Investment Vehicles | Section 2: Investment Vehicles |
What is Call Option?
A contract giving the buyer the right, not the obligation, to purchase the underlying at the strike price. The buyer pays a premium and risks only that premium; the seller collects it and takes on the obligation to deliver.
What is Put Option?
A contract giving the buyer the right to sell the underlying at the strike. Used to hedge a long position or to speculate on a decline. Buying a put is a defined-risk way to express a bearish view, unlike shorting.