Put option:

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.

A put becomes more valuable as the price of the underlying stock depreciates relative to the strike price. For example, if you have one Mar 08 Taser 10 put, you have the right to sell 100 shares of Taser at $10 until March 2008 (usually the third Friday of the month). If shares of Taser fall to $5 and you exercise the option, you can purchase 100 shares of Taser for $5 in the market and sell the shares to the option’s writer for $10 each, which means you make $500 (100 x ($10-$5)) on the put option. Note that the maximum amount of potential proft in this example ignores the premium paid to obtain the put option.

Call option:

An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

It may help you to remember that a call option gives you the right to “call in” (buy) an asset. You profit on a call when the underlying asset increases in price.

Call option is a right to buy a stock at a certain price. A put option is a right to sell a stock at a certain price. all options have an expire date. Once the expire date passes the option is expired and worthless. Basically the way the call option works, is if you buy an call option with a stirke price of say $100. the current stock is at $80. this option is not going to be used till the price of the stock goes over $100. cause there is no point of buying a stock at $100 when the price is only $80 on the market. But let say the price goes to $150. Now you can use the option, and buy the stock at $100 even though the price of the stock is $150, and turn right around and sell the stock at $150, profiting $50 for every option you have. The put work in reverse in that if you buy a put At $80, that give you the right to sell a stock at $80. if the price goes down below $80, lets say $60, then you could buy the stock at $60 excercise your option and sell the stock at $80 ,and make $20 off each option. Typically the option is a very low amount compared to the cost fo the stock. So its a way of taking very little money and making a big investment. However it is also very risky, in that if the price doesnt go in the direction you want it to before the expiration date you lose everything.

Options can be difficult to understand.

A call gives you the right, but not the obligation to buy the underlying shares of a stock .

A put gives you the right, but not the obligation to sell the the underlying shares of a stock.

And if I’m correct, that probably made no sense to you, because it sure didn’t for me when I started trading options.

So heres the skinny: One option contract allows you to control 100 shares of stock. If the value of the stock goes up, then the value of the option contract would go up as well. However, the value of the option will not go up as much as the stock, meaning a $1 increase (or decrease in the case of puts) in the stock value will generally not result in a $1 increase in the option value. This is due to differences in strike price (how far in or out of the money an option is) as well as time decay (how long till the option expires etc.

A call works like this: It gives you the right to purchase the underlying 100 shares of stock at the strike price. For example: ABC stock is at $50 and you have a september $50 call. Then ABC stock moves to $55. You can now exercise the call meaning you can purchase the shares of stock at $50 and turn around and sell them at $55, pocketing the difference. However, most people just sell the option contract for a profit because it’s easier and requires less money

A put works the opposite, meaning if stock ABC is at $50 and you have a $50 strike put, then suppose stock ABC falls to $45, the put gives you the right to have sold the stock at $50 and bought it at $45, thus pocketing the difference.

Thats just the surface, options are way more complex than this.

This is a good site to read more.

I am an expert in knowing when options will increase in value.
If u need a good system to learn on how to make money trading options just drop me an e-mail

investopedia has good explanations – it’s like an online dictionary/ encyclopedia of investing. Be very wary of options – Most people get hosed, while experts benefit, even more so than stocks. Selling calls reduces risk a bit, though. Options will expire at certain dates, and have a variety of “strike prices”- the price you can put or call at.

Buy a put, stock price goes down- good
Buy a call, stock price goes up – good
Sell either one, you are keeping most of the risk, and getting paid a bit.

Buying ” out of the money” options is a high risk get rich quick scheme – buying “in the money”, or far in the future gives a better chance they’ll still be worth something when they expire (or at any time until then, they can be re-sold, or bought back) – but you pay the premium, when you’re the buyer, and it loses value every day ( if the stock price stays the same).
Trading options requires different levels of pre-approval.
Level 1 allows the sale of calls, against stocks that you own.
This is probably the only worthwhile idea, but you’ll miss out if your stock rises ( but you can buy “call” back & sell next months- a “spread order” & get paid another “premium”) selling puts requires level3, and can wipe you out in a hurry, if you get carried away.