If you buy a call, you have the right (not the obligation) to purchase the underlying security at the strike price on or before expiration.'
This is a bullish strategy because you want the price of the underlying security to be above the strike price by expiration. If this happens, your profit will be the difference between the price of the underlying security and the strike price, minus the premium paid for the call option.
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Short Call:
If you write, or sell a call, you have the obligation (not the right) to sell the underlying security at the strike price, if assigned.
This is a bearish strategy because you want the price of the underlying security to be below the strike price by expiration. If this happens, the option will expire worthless and your profit will be the premium you received for selling the call option. This is a high risk investment strategy.
close
Long Put:
If you buy a put, you have the right (not the obligation) to sell the underlying security at the strike price on or before expiration.
This is a bearish strategy because you want the price of the underlying security to be below the strike price at expiration. If this happens, your profit will be the difference between the price of the underlying security and the strike price, minus the premium paid for the put option.
close
Short Put:
If you write, or sell a put, you have the obligation (not the right) to buy the underlying security at the strike price, if assigned.
This is a bullish strategy because you want the price of the underlying security to be above the strike price by expiration. If this happens, the option will expire worthless and your profit will be the premium you received for selling the put option. This is a high risk investment strategy.
