Calls and Puts

What this unit covers

Understand a call option and a put option as two different rights, the right to buy and the right to sell at a set price, before any strategy is layered on.

By the end you will be able to

• Explain a call as the right, not the obligation, to buy at a price fixed today.
• Explain a put as the right, not the obligation, to sell at a price fixed today.
• Recognise that a right costs money upfront and that cost is lost if the right goes unused.

How it starts: A Price You Might Want Later

1. A stock trades at 900 rupees, and you think it could rise soon.
2. You pay 20 rupees now for the right to buy it at 900 rupees.
3. If the price falls instead, is that 20 rupees still worth paying?

Words you will meet

Call option

The right, not the obligation, to buy something later at a price fixed today.

Put option

The right, not the obligation, to sell something later at a price fixed today.

Premium

The upfront price you pay to hold an option, lost whether or not you use the right.

In this module: Options Fundamentals

1. Calls and Puts (this unit)
2. Strike, Expiry & Premium
3. Buyer and Seller Roles
4. ITM, ATM, OTM & Intrinsic/Time Value