Every option is one of two types. Once these click, half of options trading makes sense.
A call = the right to buy
A call gives you the right to buy the underlying at the strike price.
You buy a call when you think the price is going up. If the stock climbs above your strike, your right to buy cheaply becomes valuable.
Example: you buy a call with a $50 strike. The stock rises to $60. You can buy at $50 and it’s worth $60 — a $10 advantage per share, minus the premium you paid.
A put = the right to sell
A put gives you the right to sell the underlying at the strike price.
You buy a put when you think the price is going down, or to protect something you own. If the stock falls below your strike, your right to sell high becomes valuable.
Example: you buy a put with a $50 strike. The stock drops to $40. You can still sell at $50 — a $10 advantage per share, minus the premium.
The one-line memory hook
- Call → “call it up” → you profit when price rises.
- Put → “put it down” → you profit when price falls.
Buying vs selling
You can also be on the other side and sell (or “write”) a call or put. The seller collects the premium up front but takes on the obligation if the buyer exercises. We’ll cover selling later — for now, just hold onto call = right to buy, put = right to sell.