Call Options vs Put Options: A Complete Guide
Call options and put options are the two fundamental building blocks of options trading. Understanding the difference between them is essential before trading any options strategy.
What Is Call Options?
A call option gives you the right to buy a stock at a specific price (strike) before expiration. You profit when the stock price rises above the strike price. Buying calls is a bullish strategy.
What Is Put Options?
A put option gives you the right to sell a stock at a specific price (strike) before expiration. You profit when the stock price falls below the strike price. Buying puts is a bearish strategy.
Key Differences
| Feature | Call Options | Put Options |
|---|---|---|
| Right to | Buy at strike price | Sell at strike price |
| Profit when | Stock rises | Stock falls |
| Direction | Bullish | Bearish |
| Max loss (buyer) | Premium paid | Premium paid |
| Used for | Leveraged upside | Hedging or shorting |
The Bottom Line
Calls are for when you expect a stock to go up. Puts are for when you expect it to go down or want to protect existing positions. Both have defined maximum loss when purchased, making them useful risk management tools.
Part of our Options Trading Guide