Call vs. Put Options: A Quick Comparison

Front

What is a Call Option?

Back

A Call Option gives the holder the right, but not the obligation, to buy an underlying asset at a specific price before a certain date.

Front

What is a Put Option?

Back

A Put Option gives the holder the right, but not the obligation, to sell an underlying asset at a specific price before a certain date.

Front

What strategy is associated with Call Options?

Back

Call Options are used in a bullish strategy when you expect the asset's price to rise.

Front

What strategy is associated with Put Options?

Back

Put Options are used in a bearish strategy when you expect the asset's price to fall.

Front

What is the profit potential of a Call Option?

Back

The profit potential of a Call Option is unlimited if the asset's price rises significantly.

Front

What is the profit potential of a Put Option?

Back

The profit potential of a Put Option is limited to the difference between the strike price and the asset's price at expiration.

Front

What is the risk associated with Call and Put Options?

Back

The risk is limited to the premium paid for the option.

Front

How are Call Options similar to insurance?

Back

Call options are like insurance against a price increase.

Front

How are Put Options similar to insurance?

Back

Put options are like insurance against a price decrease.

Front

The profit potential of a put option is limited because....

Back

The profit can only be the difference between the strike price and the stock price at expiration. It is not unlimited because the difference between the strike price and the stock price will stop at $0.