This article comes from the official account: Option Understand
Call options and put options are two basic types of options that play an important role in the options market. Although they are all financial derivative instruments such as options, their rights and applicable market conditions differ. #期权日记##期权交易##上证50etf期权#
认购期权（Call Option）
A call option is the right given to the buyer to buy a certain amount of the underlying asset (e.g., a stock) at a specific price (exercise price) at a specific time in the future (European-style options) or at any time before the expiration date (American-style options). The buyer of a call option expects the price of the underlying asset to rise because then they can buy the asset at a lower strike price and sell it at a higher market price to make a profit. The seller (or writer) of the call option is obligated to sell the underlying asset at the strike price when the buyer exercises the option.
认沽期权（Put Option）
A put option is the right to give the buyer the right to sell a certain amount of the underlying asset at a specific price at a specific time in the future. Buyers of put options usually expect the price of the underlying asset to fall, so they can exercise the option when the market price is lower than the strike price to sell the asset at the strike price to make a profit. At the same time, the seller of a put option is obligated to buy the underlying asset at the strike price when the buyer exercises the option.
Main differences:
1. Market expectations:
The buyer of a call option usually expects the market to rise and wants to buy the stock at a lower price by exercising the option.
The buyer of a put option usually expects the market to fall and wants to sell the stock at a higher price by exercising it.
2. Rights and Obligations:
The buyer of a call option has the right, but not the obligation, to buy the underlying asset at the strike price, and the seller may be required to sell the underlying asset at the strike price.
The buyer of a put option has the right, but not the obligation, to sell the underlying asset at the strike price, and the seller may be required to buy the underlying asset at the strike price.
3. Profitability:
The buyer of a call option makes a profit when the price of the underlying asset rises, while the seller makes a profit when the price of the underlying asset does not rise or falls.
The buyer of a put option makes a profit when the price of the underlying asset falls, while the seller makes a profit when the price of the underlying asset does not fall or rise.
4. Risk and Reward:
The buyer's risk for call and put options is limited (losses are limited to the option premium paid), but the potential return is unlimited.
The potential return for the seller of call and put options is limited (the option premium received), but the risk may be unlimited (because the price of the underlying asset can fluctuate greatly).
In actual trading, investors can choose to buy or sell call options and put options according to their expectations of the market and risk tolerance. These two options can be used in a variety of strategies such as speculation, hedging, or income enhancement. Understanding the differences between them is essential for developing an effective trading plan and risk management.