Difference Between Call and Put

call vs put

Call and Put are different options used during transactions in the stock exchange. These two terms are mainly used for trading in commodities and stocks. Both call option and put option are agreements between a buyer and a seller. It is very important to know how these two options work if you want to do trading in a stock exchange.

Both the put option and call option are the same but one functions opposite to the other.

When talking about a call option, it is the right entrusted to a trader to buy stock shares for a set price (strike Price). If the price of shares rise higher to that of a set price or strike price, then you are sure to make profit buying the stock at that price. You can then sell it at a higher rate.

Contrary to a call option, put option is the right entrusted to a trader to sell stock shares for a set price (strike Price). If the price of share falls below that of a set price or strike price, then you are sure to make profit buying the shares. You can then sell it at a higher rate.

Call option is used when an investor feels that a stock’s price will rise. On the other hand, put option is used when an investor feels that the prices are going to fall.

If you have a call option contract, there is no need that you should buy the stocks. But if you insist of buying the stock, then the seller with whom you have entered a call option is bound to give it to you.

In put option, an investor has the right to sell the shares or stocks at a definite price within a time limit. And the other investor with whom you have a put option is bound to buy the stocks if you insist on it.

Summary

1. Both call option and put option are agreements between a buyer and a seller in a stock market.
2. When talking about a call option, it is the right entrusted to a trader to buy stock shares for a set price (strike Price).
3. Contrary to a call option, put option is the right entrusted to a trader to sell stock shares for a set price (strike Price).
4. Call option is used when an investor feels that a stock’s price will rise. On the other hand, put option is used when an investor feels that the prices are going to fall.

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