CALL OPTION PUT OPTION

1. Meaning It offers the right but not
obligation to buy the
underlying asset at a
particular date for the pre-
decided strike price.
It offers the right but not the
obligation for selling the
underlying asset at a
particular date for the pre-
decided strike price.

2. Investor Rise in the Prices Fall in the prices

Expectations
3. Profitability The gains can be unlimited Gains are limited since price
since price rise cannot be can fall steadily but will stop
capped. at zero.

4. Permits Buying the stock Selling of stock

5. Analogies Considered a security It is like an Insurance

deposit taking a product at a offering protection against a
certain fixed price. loss in value.