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trading - put and call?

  • 31-07-2017 03:01PM
    #1
    michaelp97
    Registered Users, Registered Users 2 Posts: 66 ✭✭


    Just wondering if anyone could point me in the the direction of how to understand put and call options better? I do a bit on plus500 with like Deutsche bank options etc but really I'm just getting lucky without fully understanding what I'm betting on


Comments

  • #2
    kenyard
    Registered Users, Registered Users 2 Posts: 944 ✭✭✭kenyard


    http://www.investopedia.com/terms/o/option.asp
    Basic principal: a call allows you buy a share for the agreed price. A put allows you sell it for agreed price. The big benefit is it allows you trade e.g. amazon which is 1k a share for only a portion of the price.
    The uses in principal are extensive e.g. hedging.


  • #3
    ftse100
    Registered Users, Registered Users 2 Posts: 187 ✭✭ftse100


    A call option gives the buyer the 'option' to buy an asset at an agreed strike price on or before a given date. A put option gives the buyer the 'option' to sell an asset as an agreed strike price on or before a given date.

    If amazon is trading at $1000 per share today and you but an 1100 call option expiring august 15th. You will gain if the option is above 1100 on august 15. I.e. the option will be in the money. the option is out of the money when amazon trades below 1100. The strike price in this example is 1100. With a put option at 1000 if amazon finishes trading at 950 on august 15th you make 1000-950=50 per contract less any premiums you bay to the option writer. The option writer is the guy on the other side of the option. A buyer of a call is generally bullish or hedging. A buyer of a put option is generally bearish or hedging.. Writing a call and or a put generates premium income only.. i.e. you pay a premium to the writer of a call or put option..


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