Options

Option – the right to buy or to sell 100 shares of stock at, a specified, fixed price and by a specified date in the future

Call Option – an option acquired by a buyer or granted by a seller to buy 100 shares of stock at a fixed price within a specified time period.

Put option – an option acquired by a buyer or granted by a seller to sell 100 shares of stock at a fixed price within a specified time period.

A call buyer believes and hopes that stock’s value will rise, but a put buyer is looking for the price per share to fall.

A call seller hopes that the stock price will remain the same or fall, and a put seller hopes the price of the stock will rise.

For option buyers, that movement has to occur quickly enough for that profit to materialize while the option still exists.

 

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