Keyword Analysis & Research: call option and put option example


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Frequently Asked Questions

What is the difference between a call option and a put option?

Call option and Put option are the two main types of options available in the derivatives market. A Call option is used when you expect the prices to increase/rise. A Put option is used when you expect the prices to decrease/fall. Warren Buffett has described derivatives as weapons of mass destruction.

What are some examples of call and put options?

A Call option is used when you expect the prices to increase/rise. A Put option is used when you expect the prices to decrease/fall. Warren Buffett has described derivatives as weapons of mass destruction. Options, a type of derivatives, also falls under the category of weapons of mass destruction.

What are the advantages of using call and put options?

Call and put options give you the right to buy and sell shares of stock at a set price during a specific period. You pay a nonrefundable premium in both cases, which you lose if you don't exercise the option. Both types of options come with the potential to earn and lose money on your investments.

How can I use call and put options to make money?

Call options give the holder of the contract the right to purchase the underlying security, while put options give the holder the right to sell shares of the underlying security. Both can be used to let investors profit from movements in a stock’s price.


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