Call options and put options are two common trading tools in the derivatives market, and they are also an important choice for investors to invest in options. Before understanding and applying these two options, we need to understand how to understand the difference between call and put optionsThis article**ferry: Caishun options
How to understand the difference between call option and put option?
A call option is a type of right, not an obligation, that gives the holder the right to purchase the underlying asset at a specified time in the future. A call option is used when the investor expects the underlying asset***. When the underlying asset is the subject of a call option, they buy the call option to enjoy the potential future gains. If, at the time of the expiration of the option, the underlying asset is higher than the agreed, then the call option holder can choose to exercise the option to agree to purchase the underlying asset and thus obtain a profit.
In contrast, a put option is a kind of right to give the holder the right to sell the underlying asset at a specific time in the future, and it is also not an obligation. Put options are used when the investor expects the underlying asset***. When the put option holder will have the underlying asset, they will buy the put option to protect or make a profit. If, at the expiration of the option, the underlying asset is lower than the agreement, the put option holder can choose to exercise the option to sell the underlying asset by agreeing to sell the underlying asset, thereby making a profit in ***.
The difference between a call option and a put option is mainly reflected in the expectations of investors and the market and the direction in which they exercise their rights. Call options are offered to those investors who anticipate the underlying asset***, so it is mainly used for speculative or bullish strategies. Put options are offered to investors who anticipate the underlying asset*** for hedging or putting strategies. This means that there is a clear difference in market sentiment and investment strategy between call and put options.
Another difference is the cost of call and put options. Buying a call option pays a certain premium, which is the cost of purchasing the option. The purchase of a put option also requires a premium payment, but it is usually higher than the purchase of a call option because the put option has more intrinsic value. This is because the put option has a greater inverse relationship with the underlying asset. When the underlying asset is ***, the intrinsic value of the put option increases, so the premium will increase accordingly.
In addition, there are differences in risk and return between call and put options. Since a call option is suitable for a call strategy, when the underlying asset is *** or remains unchanged, the value of the call option decreases, and the investor only loses the premium already paid. On the other hand, a put option is suitable for a put strategy, where the value of the put option decreases when the underlying asset is *** or remains unchanged, but the investor's loss is only the premium paid.
In summary, there is a clear difference between a call option and a put option. A call option is available to investors who anticipate the underlying asset***, while a put option is available to investors who anticipate the underlying asset***. These two options have different cost, market sentiment, risk and return characteristics. Understanding these differences can help investors better use call and put options to invest in options and make choices based on their own expectations and strategies.
Summary: The above is how to understand the difference between call options and put optionsI hope it will be helpful to all options investors and learn more about options.