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Understanding Calls and Puts

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Call v. Put Call: -Allows you to buy stock -If you have one call that means you are able to buy that stock at your set price -It has to reach the set price on or before your contract's expiration -If it doesn't reach the set price, your contract deteriorates in value and you lose your option premium -You buy it in hopes of stock going up -As the stock price goes up, the call increases in value -Similar to going long within stocks Put: -Allows you to sell stock (it gives you the right, but not the obligation) -For example: you own 100 shares of Microsoft at $25 and you own a put of Microsoft at $20 -If the stock declines to $10/share and you have the put for that year, you can put somebody the stock at the $20 range -You buy it in hopes of stock going down -As the stock price goes down, the put increases in value -You are hoping to sell the contract later at higher value -Similar to short-selling Continue to learn with me at: http://tradersfly.com/ Check out my courses at : http://rise2learn.com Facebook Fan Page: http://www.facebook.com/tradersfly/ Get My Charts on Twitter: https://twitter.com/tradersfly/
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Text Comments (110)
TheCasacoyote (14 days ago)
Do you always have a buyer for the put or call?
YariMari (1 month ago)
Kristopher Hasenbuhler (1 month ago)
3:23 He cuts to the chase! Your welcome!
Boba Fett (28 days ago)
Wallace Hardiner (2 months ago)
Hello. I have a question if you could help. I trade on questrade. I purchase 10 options for a stock at 1.50$ per 100. It was a 2019 january 1st expiration strike 16. I checked today and it says i have [email protected] 0 average. And my p&l is is green 150$. What does that mean? I dodnt sell them yet. But under it says 0.15.???? Please help
Stax of Funk (2 months ago)
whatever happened to you buy\sell a stock and get the price it lands at the end of the trading day
Chris Vandernaald (4 months ago)
good lesson.. easy to understand.
kamms moonfresh (5 months ago)
Dammmm...that was so simple to understand. Thank you SIR!
K L (5 months ago)
LFIN at $70. Buy a long term Deep OTM put LFIN strike $10 for pennies to the dollar extremely cheap (maybe $0.05?) It actually did drop all the way to $8 in 3 days. Now if you bought 500 PUT contracts for $2500 and the put becomes ITM... (option price $5) HAHA That would maybe be a 10000% gain. That's $2.5 Million in 3 days.
James Driscoll (7 months ago)
Can you buy puts if you don't own the stock? Like just to sell the contract later?
allergygal (18 days ago)
+Kristopher Hasenbuhler You don't have to own the stock to buy puts.
Kristopher Hasenbuhler (1 month ago)
Someone needs to answer this question!
Sujay Joshi (8 months ago)
Explained simply. Very nice.
Harlacan (10 months ago)
I don't get the whole Options theory, its like grasping thin air. Your paying for an Option to buy/sell shares at a certain price, yet there's no intention to ever own them, just trading contracts that are based on speculation of future price movement.
Public Domain (10 months ago)
He looks like Jesse from Breaking Bad
negromermaid 420 (11 months ago)
So when someone buys a put option, they don't own the shares?
bobby hunter (1 year ago)
Can you explain buy to open Buy to close Sell to open Sell to close Please
YAMELY GONZALEZ (1 year ago)
Very helpful
SIR-CASSIAN (1 year ago)
Thu Ta Naing (1 year ago)
Thanks so much sir.
low-QUALITY crypto (1 year ago)
Why would anyone by the out option of the price is way below what they would buy it for? Like do you have to honor a put? I understand you have to right to sell if you want, but what if the buyer doesn’t want to buy?
van biak (1 year ago)
Sasha, what is the best option's book you ever read. I took your options courses and I consider myself intermediate options trader. I will be very happy to here from you. I have read three books at least about option.
the annointed one (1 year ago)
I have a question how much would a call cost compared to the current price of the stock? Also do people usually not use the contrsct and instead they just sell the contract basically!
Grace JD (1 year ago)
If I buy a put for one contract at a strike price of $10 and the stock is trading at $12 at the time and the put contract expires in three months and the stock tumbles to $5 in one month can I sell my put option before the put contract expires? Thank you.
Alpha Centauri (1 year ago)
Calls and puts -the sure shot way to get bankrupt ...
x2kCheeese Edits (1 year ago)
Alpha Centauri how is it "the sure shot way to get bankrupt" when the most you can possibly lose is what you put in? (not talking about naked calls or puts). If you only put in what you can afford to lose then you wont go bankrupt...also with options its quite easy to double or even triple your money if you find the right setups.
Emeeelx333 (1 year ago)
OMG, thanks a lot..
vat 69 (1 year ago)
what is the best platform to trade options?
Kishore G (1 year ago)
thank you!! you made it easier
Angela Depina (1 year ago)
Albert Mars (1 year ago)
do i need a margin account to do puts and calls?
MrProtoking (1 year ago)
Why would someone buy your put. So, if I have 100 shares at 100$, with a put at 80$, and the stock drops to 60, why would I be able to sell my shares at 80 still? Why would anyone buy by 80$ share over the open price of 60$ per share
Scottie Scott (1 year ago)
The person who sold you that 80 Strike Put is legally obligated to buy that stock from you at $80/share, even if the stock drops below $60. (Option sellers have the obligation). The Put Option Seller is hoping that the stock moves up, stays the same or hopes that (even if the stock trades slightly down) the stock will stay above the 80 strike price by expiration. The seller receives the premium for undertaking that risk. They keep it all (like an insurance company) if the stock (your house) doesn't go down in flames. If the stock does go down, you can then exercise your Put Option to prevent further loss or just use the ITM put as income (if you bought the Put for speculation).
nikz (1 year ago)
I think normally you'd be charged to take out any option, its just a way of passing on the risk to others.
MrProtoking (1 year ago)
So basically If you buy an option from me for $80, and the stock goes below $80. The contract obligates them to pay the $80 per, instead of the market price of, fr example, $60?
MrProtoking (1 year ago)
I dont get how the demand is created though? With a car you buy an old car when a new one is too expensive, but that car still holds value. I wouldnt buy a used car for $80 if its only worth $60?
Mido Dido (1 year ago)
Matt Dathew (1 year ago)
very well explained
Multispek mutvimanex (2 years ago)
how many stocks can u buy or sell with the contract?
Reed Greenfield (2 years ago)
my question is how long does the buy and put options last?
Reed Greenfield (2 years ago)
Ok thanks for the response I appreciate it..
Camron Ra (2 years ago)
Hi, great video! I'm now learning about options. I have a few dumb questions. Why and who would purchase stock above the market price? And who sells the stock below the market price? Are these transactions with the broker or the company? I'm unsure of the parties in these transactions. Thanks.
It's Me (2 years ago)
I'm no expert, but from what I"ve gleaned in my experience with trading so far is that puts/calls are generally like insurance on stocks that you buy or short. Say there's speculation of Apple going from $50/share to $300/share, so you buy 100 shares and you're out $5000 with the potential to make 30 grand. Well...say the speculation was wrong, the stock crashes to $10 and you lost $4000. If you would have set up a Put option for $40, then you would have the right to sell those 100 shares at $40 each *regardless* of the actual market price. So now you can sell back your 100 shares for $4,000 and you're only out $1,000. Still, no perfect situation to be in, but you didn't loose nearly as much money. You would do precisely the opposite if you were shorting a stock and you would buy Calls rather than Puts. Other than these two scenarios, I can't really see the purpose of options at all....But I would gladly be corrected!!
Chase Lanier (2 years ago)
so puts are how people make money off of shorting?
It's Me (2 years ago)
So a PUT is basically signing a contract with your grandma that she WILL sell you the Honda for 15K, but you aren't obligated to in case your friend changes his mind and wants his money back? But the PUT protects you because if grandma refuses to hand the car over for the 15K, you can murder her and bury her in the backyard and then take the Honda. So PUTs allow me to murder the stock owners if they refuse to sell me their stocks at the contracted price. Am I understanding all of this correctly?
Chase Lanier (2 years ago)
+Sasha Evdakov (TradersFly) Thanks for replying. I understand puts quite well I am just confused about how shorting stocks works to make you money
Doug Zembiec (2 years ago)
A call is an option to buy a stock. As the stock price goes up the value of the call goes up ie the demand to own that call option or the option to buy stock increase. So in other words as stock becomes more expensive your right to buy this stock at a strike price determined by the call option cause the value of the option to increase. An option to sell or put option allows the seller the right but not the obligation to sell a stock at a predetermined price. If the stock price drops the put option increases because you can still sell this stock at a higher price. Option values are determined by 4 factors :1.volalitly in the market2.time to expiration 3 . stock price4.strike price5.interest rates
Stiel Serious (2 years ago)
I was having trouble with the difference between the two, but you perfectly explained that difference. Thanks a ton!
mohzmmed zia (2 years ago)
how you explain long put and short put?
Vu Nguyen (2 years ago)
Great video. you explained it very well
Roy Williams (2 years ago)
Do you know where I can get a qauility stock screener
Roy Williams (2 years ago)
If i buy a put contract and I made an profit can I sell the contract to make an profit as well as a call option? If i bought a put/call options at 75 and the strike price is 74.93 on a call option what do i need to make a profit as for put if the strike is 74.93 and i bought a put for 72 how do i make a profit
Roy Williams (2 years ago)
Say I buy a put option at a strike price of 72.00 what would the price have to be for me to make a profit? With Call/Put Option do I have to own the stock to make a profit are can I just sell the contracts?
g3mz1989 (2 years ago)
is this the same or similar as bull market vs bear market?
g3mz1989 (2 years ago)
+Sasha Evdakov (TradersFly) makes sense, thank you!
Syed Kollol (2 years ago)
very nice and simple!
Mithun Kurian (2 years ago)
Does that mean, when you BUY call, trader expect to go up the price and when you SELL call you expect price to go down.. If that's the case what's the difference in Buying a Call and Selling a Put options? Because in both case price expected to go up above the strike price. Please Explain..
Tyson Reynoldson (2 years ago)
Thank u
Ericka Ongtiong (2 years ago)
Do you have a video explaining long vs short call/ put?
A. Kessler (2 years ago)
when you are putting, who would buy your stock at a higher price when it is worth less? thank you.
Lincoln Aisagbonhi (2 years ago)
If you buy a put option, it is binding on the seller to buy the option from you at any time you decide to sell it; it is a contract. It is however not binding on you, if you decide not to exercise your right you only lose the premium you paid.
Bonnie (2 years ago)
+SkatingDemiGod I also would like to know. any info yet?
IncrediblePokerMind (2 years ago)
+A. Kessler The person that sold you the put contract i'm guessing but not 100% sure. I was also wondering about this too hope somebody can answer this question with more detail.
AcelSam (2 years ago)
Thank you for this. It really simplified it.
Ryan Hein (2 years ago)
How do you choose the 'limit' price when buying an option? Is limit supposed to be the same as the strike price?
Ryan Hein (2 years ago)
Thanks buddy. You've helped greatly!
Ryan Hein (2 years ago)
Dude I watched a bunch of videos and did not get it until I watched yours. So just one question, if I call a stock at the strike price of say $100, and it goes to $200, that gives me the right to exercise that option to buy that stock at $100. So I then own the shares at the $200 price right? Does that mean I have to do another option to sell those shares? Or is it just like being long the stock at $200, and I can just simply sell it? Or do I have to 'put' the stock at strike price $200 to sell the shares?
Mouli Cherukuri (2 years ago)
I really liked your explaining , I want more than a subscription of your channel , I shared the video , in my facebook , gmail , but still.I want more what to do , hahah , , sorry iam over exciting , and that is a new joke in the market , ( that excitement is true ) hehe
Mouli Cherukuri (2 years ago)
Oh thanks
Dennis Cookinham (2 years ago)
what happens if there is no one to fund the put? It is happening today in China.
Katie M (2 years ago)
I need to make sure smth : If I am long , I am buying right to buy(call) or sell. (put) and if I am short I am selling right, but I have liability to sell(call) and buy(put).
Maxwell Dynamics (2 years ago)
If a put executes does that cause you to short the 100 shares?
Maxwell Dynamics (2 years ago)
+Sasha Evdakov (TradersFly) I guess to be clear and get bit more intricate, can you please tell me what happens in the 3 following situation. I already know that when you buy a Call that gets exercised you're obligated to buy the 100 shares. But what happens when: 1) You sell a Call, and what happens when it get exercised? I'm assuming if you sell a call you make money on the premium if you trade it if the assed goes down before expiry because that would be like shorting the call (in my mind). But i'm mainly not sure what happens if you sell a call and it gets exercised. 2) You buy a Put, and what happens when it gets exercised? I'm assuming if you buy a put and it executes ITM then you get the 100 shares shorted at the strike price. so you continue to make money as the asset goes down since you're now short 100 shares. 3) You sell a Put, and what happens when it gets exercised? I'm assuming when you sell the put and trade it for the premium, you make money as the ask goes down or the underlying asset goes up in value. And if you sell a put, in my mind that is like shorting a short (a double negative) so if it expires ITM and executes then you would go long at the at the current stock price? And in depth answer would be greatly appreciated.
Edwin Mafla (2 years ago)
on the put example, you said that if the "Microsoft stock" decreases from $20 (Strike price) to $10, you can put that amount to somebody. So is the person you did the contract option obligated to buy the stocks at $20 a share? or can the customer choose not to. I know you have the right but not the obligation to sell it, but does the buyer has any say on the matter?
Steve Bainnson (5 months ago)
With regards to the person that is receiving the PUT, why would they allow themselves to be in the situation where they are getting a stock valued at less than the face value of the PUT?
Daniel Rubio Sánchez (2 years ago)
Thank you for the video. Great explanation to solve my questions for Finance class!
Obsidian1392 (2 years ago)
Simple and quick video. Many thanks
Donald Cedar (2 years ago)
When I buy a stock I hope it goes up so I can sell it for more than I bought it. If it drops in price I will lose money if I sell the shares. So what's the disadvantage of a call? I am allowed but not obligated to execute the call option if the stock goes up. What happens if it goes down? I just lose that call option? That doesn't seem like much of a disadvantage.
Shirisha k (3 years ago)
i am studying in ca final & i don't have exposure in stock markets.I Find myself in difficult position to understand these terms,sir could u tell me how to study these concepts, i have one question,a person should have companies stock to trade in options
Bradley Friedman (3 years ago)
Hope this helps someone get it straight: The clearest way for me to understand it is that the writer (seller) is locked into a price in a put option, and the buyer is locked into a price in a call option. In the case of a PUT option if the stock's price goes down (to the disappointment of the writer), the writer has to pay a higher price than what the stock is worth on the market because he was locked into a set price by the buyer who payed him a premium for doing so. So the buyer of a call will go to the market where the price is low now, purchase 100 stocks (if he only bought one option: because options are sold 100 of the stock at a time) and sell those 100 stocks to writer for the (now higher than market) price the writer was paid a premium in the beginning to agree to pay for in the case he (the writer) got unlucky and the stock prices fell. In the case of a CALL, the buyer pays a premium to the writer and in doing so locks himself (the buyer) into a rate in the hopes that the stock price will rise so he can exercise his option and buy them for cheap while the stock is actually being traded for a higher price on the market. The writer in this situation is then obligated to sell the stocks to the buyer for the price the buyer was locked into. The writer could have either owned the stocks when he wrote the option (in which case his stocks are worth the higher market price) or he didn't own the stocks (naked) and now has to purchase the stocks at whatever the current higher market price is and sell them to the buyer of the cal for the lower price they agreed on. This is why writing naked calls is dangerous because although you are paid a premium, the potential for a stocks price to rise is infinite and you will then have to purchase the stock at that price and sell it to the buyer at the lower price that the buyer was locked into.
Easy to understand and simply explained, thanks for an informative video
Satwik Kamath (3 years ago)
Do you have to specify what value the stock must reach/fall to before the option can be executed? For example, CALL OPTION (w/ strike value of $20 and Exp: November 2015), can only be activated and executed IF the value reaches $25 before November? Or, If it is getting close to the deadline, can you request to buy stock  even if the stock price has marginally gone up, as to not waste the option and flip it for a small profit? I hope this question is somewhat clear :)
Art Kinson (7 months ago)
Satwik Kamath cry g cu no by guru¢ t
Raybo sflorida (3 years ago)
WHY IS IT ,,nobody can explain this in detail for beginners,,its like when i took spanish at MDCC,,they gave me a book thats all spanish,,how am i supposed to read it when i havnt even learned yet!!!!Yep i dopped that class.
adrian peirson (3 years ago)
All this effort trying to play the shell game with stock prices with no concern for the actual companies or people working for them. Traders ought to do something useful for humanity.
Drew dordan (2 years ago)
+adrian peirson oh boo hoo
callum kellas (3 years ago)
I understand all this but dont get the concept of short position on a call and long positions on a put?
Tony hay (3 years ago)
Sasha,  What none of you guys are doing is to take a screen shot of the options quote from yahoo or google finance and explaining how to read them in the first pl;ace and secondly, there are some stocks I am interested in buying call options on, but I notice the price of the stock has already exceeded the strike price. So does the  premium remain the same as the bid and ask. Thats where I am confused. Also once I buy and option, does the premium I  paid keeps going up as the stock price goes up.Am I not locked into that premium regardless. I understand where I to buy more options, I'll have to pay higher premium.
Tony hay (3 years ago)
Thanks Sasha I just am trying to to get back into trading after taking a bath in 2001-2002 meltdown. I want to start with options and have started a paper money account on thinkorswim platform.  I did open an account with a brokerage but am hesitant to jump in unless I know what I am doing. So I hope yo don't mind my asking a lot of silly questions.
Tom M (3 years ago)
cool vid, i'm messing around with calls and puts on the investopedia simulator bought a call on google and it ended up being up around 140% when I sold it lol, bought 30 contracts for $2.75 and it went up to $6.30
Orry Clips (3 years ago)
I just imagine this but tell people that a CALL it's like when someone calls and you pick UP the phone( so you hope the price to go up ) and a PUT it's like when you put the phone DOWN it's an analogy just to make it easy for noobs to remember the meaning of the words
Jacob Bamyani (3 years ago)
Hi Sasha, I have shares and I like to trade some of it in option. How do I go about it? So I will be the "put", right? Thankyou
Eunice Yee Huey (3 years ago)
Thank you so much!! I was having lots of doubts while studying but after watching a couple of your videos,I finally understand!! Thank you! ^_^ 
ishan narula (6 months ago)
you are welcome baby
akshayakdc (7 months ago)
Eunice Yee Huey understood*
Brandon B (3 years ago)
Why not just avoid it and go long or short sell? Less complicated.
Jose Garcia (4 years ago)
dude,you are a great teacher!if it was'nt for you i'd be screwed.thanks for the lessons
FELiPES101 (4 years ago)
So you could short a stock @$20 in hopes that it goes down but if it goes up instead you could use a Call @$20 to ensure you don't lose money or as much money?
Mindbent (4 years ago)
Only thing I dont get is: what is the difference between buy/sell a call or put. If I can grasp that im in lol. Thanks for some great learning vids on options.
Alessa Ha (4 years ago)
Thanks for the video, great explanation. Can you please tell me: does going long the call mean buying the call contract and going short the call mean selling the call contract? And going long the put means buying the put contact, and going short the put means selling the put contract? Thank you in advance :)
Alessa Ha (4 years ago)
That's very helpful, thank you! Thanks for taking the time to respond.
Manny elpresidente (4 years ago)
can you have a call and put on same contract?
George Zhang (4 years ago)
+Sasha Evdakov Another thing i didn't get is if the gain of the option can be multiplied with the amount of  the underlings you brought, why would people just trading for the increase value of the option contract itself.
George Zhang (4 years ago)
+Sasha Evdakov  With a option straddle,does it mean no mater the underlings goes up or down, once the increase value of put (or call) option you brought exceed the call (or put) option's price you brought it, you will always make a profit, because the value of the option couldn't drop to negative as you can simply not carry it out? In this way, if you use leverage on both option, the risk of loss can limited to the lose option's brought price,but the gain can be magnify? somewhere is wrong?
Michael Perry (4 years ago)
Thank you for posting learning a lot from you. 
dsc20601 (5 years ago)
With a put, If the stock is 5.00$ & you only want to pay $4.00 for it, why don't you just wait for the stock to hit $4.00? Definition is just not making sense to me. Just wait to sell the stock @ the price you want, and wait for the Buy price.
Arvin Shirazian (5 years ago)
Bequer Montenegro (5 years ago)
This was super helpful. Thank you.
Arvin Shirazian (5 years ago)
Hi , can you please explain what is an "option value"?

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