Call option refers to an option contract in which the option buyer has the right to buy the underlying asset at the exercise price at some time in the future. According to the different exercise direction, call options can be divided into buy call options and sell call options.

1. Buy call options

The buyer of the call option thinks that the price of the variety is expected to rise, so he pays a royalty in exchange for the right to buy the variety at the agreed execution price.

Operation of buying call options:

Target: Investors expect the price of basic assets to rise.

Operation: Buy a call option contract, that is, pay a premium to get the right to buy the underlying assets at a specific price at some future time.

Risk: The biggest loss of the buyer is the paid patent fee, but the potential income is unlimited, because the price of the underlying asset may rise to any level.

2. Sell call options

The seller of the call option charges the option fee. Responsible for selling varieties at the agreed execution price.

Operation of selling call options:

Target: investors believe that the price of the underlying asset will not rise, or the increase is limited.

Operation: sell (write) the call option contract, that is, collect the royalty, but undertake the obligation to buy the underlying assets at the execution price in the future.

Risk: The biggest loss of the seller is that the price of the underlying asset rises to an infinite high. Royalties collected are the seller's biggest profit.

3. Difference

First of all, from the above explanation, the buyer who buys the call option has the right and the seller who sells the call option has the obligation.

Buy call option position is long, sell call option position is short.

The loss of income is different. The higher the variety price, the greater the buyer's profit, and the highest loss is the royalties paid. However, the seller is the opposite of the buyer. The seller's highest income is only the option fee he receives. The higher the variety price, the greater the loss, and the more unfavorable it is to yourself.

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From: Optional sauce.

Put option

Put option refers to an option contract in which the option buyer has the right to sell the underlying assets at the exercise price at some time in the future. Put options are divided into buy put options and sell put options.

1. Buy put options

The buyer of the put option thinks that the price of the variety is expected to fall or the price has peaked, so he pays a royalty in exchange for the right to sell the variety at the agreed execution price.

Operation of buying put options:

Target: Investors expect the underlying asset prices to fall.

Operation: buy a put option contract, that is, pay a premium to get the right to sell the underlying assets at a specific price at a certain time in the future.

Risk: The biggest loss of the buyer is the paid patent fee, but the potential income is unlimited, because the price of the underlying asset may fall to any level.

2. Sell put options

The seller of a put option charges an option fee. It is necessary to undertake the obligation to purchase varieties at the agreed execution price.

Operation of selling put options:

Target: investors believe that the price of the underlying asset will not fall, or the decline is limited.

Operation: To sell (write) the put option contract, that is, to collect the royalty, but to undertake the obligation to sell the underlying assets at the execution price in the future.

Risk: The biggest loss of the seller is that the price of the underlying asset falls to zero. Royalties collected are the seller's biggest profit.

3. Difference

First of all, as can be seen from the above, the buyer who buys the put option has the right and the seller who sells the put option has the obligation.

Buy short put options and sell long call options.

The loss of income is different. For the buyer, if the variety price falls, he must exercise the right, so that he can sell it at his agreed price. In short, the benefits are unlimited. For the seller, the lower the variety price, the less the income, until the loss, the biggest loss when the price drops to zero.