Type of Options

There are two primary types of options: calls and puts.

You buy a call if you think the price of the underlying stock is going to go up. You buy a put if you think the price of the stock is going to go down.

Calls: Buying a call gives you the right, but not the obligation to buy the stock at a certain time (the expiration date) at a certain price (the strike price).

Puts: Buying a put gives you the right, but not the obligation to sell the stock at a certain time (the expiration date) at a certain price (the strike price).

Another basic type of option is LEAPS, an acronym for Long-term Equity Anticipation Securities. These are call and put options bought for a long period of time, as much as 30 months into the future. It gives the purchaser an excellent way to control a stock for a long time, without paying the high price of stock ownership.

Students at BetterTrades will learn more about calls and puts when taking the options trading classes.