call options vs put options
call options vs put options
Call Options and Put
Options are two
types of derivative contracts used for trading. A Call Option gives the buyer the right to buy a stock or index at a
fixed price (called the strike price) before a certain expiry date. Traders buy
Call Options when they expect the price of the stock or index to go up. For example, if a trader expects
Nifty to rise from 23,000 to 23,200, they might buy a Call Option to profit
from that rise.
On
the other hand, a Put Option gives
the buyer the right to sell a
stock or index at a fixed price before expiry. Traders buy Put Options when
they expect the market to fall.
So, if a trader believes Nifty will fall from 23,000 to 22,800, buying a Put
Option can help them make a profit as the price drops.
The
main difference is in the market
direction:
·
Call Options = Expecting price to rise
·
Put Options = Expecting price to fall
Both options are powerful tools
for hedging risk or speculative trading, but they come with
their own risks, especially because option premiums can lose value quickly if
the market doesn’t move in the expected
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