Example of call option and put option


This practice lets you sell calls when you don't own the stock. Like gambling you can make or lose money very quickly. If the put seller already has money in his account to buy the stock, the put option example of call option and put option covered. The price that you pay for a call option depends on many factors two of which include: A put option goes up in price when the price of the underlying stock goes down.

What the call seller may do. In most cases you must own shares example of call option and put option the stock for each contract you sell - this is called a covered call. If the stock increases in price you may sell the put for a loss. Therefore, if your stock gets called away, you have the shares in your account. If you're wrong, you can lose part or all of your investment very quickly.

This practice lets you sell calls when you don't own the stock. If you don't have the financial resources to cover the obligation of buying the stock from the buyer of the put, you sold "naked puts". You make money on options if your bet on the direction of price movement of the underlying stock is correct.

If you're right, you can make quick money. Also, the proceeds from selling short are in a margin account so you have to pay interest and meet margin requirements. You can sell covered calls to generate a stream of income. A put option is a contract that gives you the right, but not the obligation, to sell a stock at a preset price.

If the value of the stock goes down, the price of the example of call option and put option goes down, and you could hold it or sell it at a loss. Alternative Actions for the Call Buyer. The seller collects the purchase price of the option but has the obligation to sell shares of the stock if the buyer decides to exercise the option. You make money on options if your bet on the direction of price movement of the underlying stock is correct.