In this post we wanted to just mention about the basics of a call and put options in its most practical used form rather than going into technicals on which there’s already enough content on the internet which you can explore.
Simply put, people who are bullish can buy a call and people who are bearish can buy a put, Wait there’s one more thing you can do i.e. sell instead of buy i.e sell a put instead of buying a call and sell a call instead of buying put.
Why sell a put instead of buy a call? The most simple answer to this is there are some advantages being a seller rather than being a buyer but keep in mind that there’s a right time for everything. At times option sellers too suffer.
To sum up
Bullish = Buy a call or sell a put
Bearish = Buy a put or sell a call
Neither bullish nor bearish = Sell a call and sell a put
Expecting one side big movement = Buy a call and buy a put.
The most basic things are buying/selling call/put. You can do various permutations and combinations in buying and selling calls and puts which are popularly called option strategies.
A basic option strategy where a call and put of the same strike price are sold is called a short straddle and if you buy instead it is called long straddle, there are numerous strategies involving different combination of call and put buy/sell which you can explore on the internet.
But any strategy that you come across on the internet will only involve either of these four things Buy a call, Sell a call,Buy a put,Sell a put.
Hope you just refreshed your understanding on the call and put options