Call and Put Options

Call options: These are contracts that give holder the right, but
not the obligation to buy an asset (i.e. stocks in our case) at a
specified price before the date of expiration. The buyer expect the
price of the underlying stock to go up.

Put options: These contracts will give the holder the right, but
not obligation to sell the stocks at a specified price within
a specific period of time. Buyers of puts options hope the price
of the stock will go down.

There are 4 types of participants in the options markets:

1. Call options buyer
2. Call options seller
3. Put options buyer
4. Put options seller

There is an important distinction between buyers and sellers

• Option buyers have rights
• Option sellers have obligations

We are going to look at options from the buyer side since
the seller is a total different ball game. In the mean time,
it is sufficient to understand that there are 2 sides of player
at any one time.

Basically, I'll give a run down on all the essential options
trading lingo for the next few days. It's very important
you understand the terminology of this investment when you
are just starting out.

Next, we'll look at strike price.