Core Concepts
Understanding the foundational mechanics of options trading is essential for navigating the derivatives market.
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- Call Option: Gives the buyer the right to buy a stock at a specified price. Traders use calls when they anticipate the stock price will rise.
- Put Option: Gives the buyer the right to sell a stock at a specified price. Traders use puts when they anticipate the stock price will fall.
- Strike Price: The agreed-upon price at which the asset can be bought or sold.
- Premium: The price paid by the option buyer to the seller for the contract.
- Expiration Date: The last day the contract can be exercised
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