Comparison between call option and put options


Buy put option in earlier of the month and sell call options when you are close to the end of the month. Unsourced material may be challenged and removed. The call contract price generally will be higher when the contract has more time to expire except in cases when a significant dividend is present and when the underlying financial instrument shows more volatility. Similarly if the comparison between call option and put options is making loss on his position i. The price of the call contract must reflect the "likelihood" or chance of the call finishing in-the-money.

Determining this value is one of the central functions of financial mathematics. More volatility is good for buying option since more time is there during month start, it gives comparison between call option and put options chance for volatility effect to take place In selling option, you incur heavy margins being blocked when compared to buying options, the money which you may be interested in entering some other contracts. By using this site, you agree to the Terms of Use and Privacy Policy. Articles needing additional references from October All articles needing additional references. Shorting naked options selling call option here is accompanied by high risk, you may be thinking that you are right about the market, but the market may deceive you.

Adjustment to Call Option: For call options in general, see Option law. Also, adding to what Nik says, you may want to consider writing options when there lesser number of days to expiry as you can take the advantage of an accelarated time decay. Unsourced material may be challenged and removed.

Articles needing additional references from October All articles needing additional references. A call optionoften simply labeled a "call", is a financial contract between two parties, the buyer and the seller of this type of option. One thing as a trader that is important is to do trades which you understand and which matches your trading personality.

This page was last edited on 30 Marchat Importantly, the Black-Scholes formula provides an estimate of the price of European-style options. The seller or "writer" is obligated to sell the commodity or financial instrument to the buyer if the buyer so decides. Articles needing additional references from October All articles needing additional references.

You may incur huge loss if market moves against you. A Practical Guide for Managers. The seller or "writer" is obligated to sell the commodity or financial instrument to the buyer if the buyer so decides.

By using this site, you agree to the Terms of Use and Privacy Policy. If not for the higher margin requirements of writing options most people might have preferred writing to buying option. Theoritically both look same for novice like me?

So do not enter selling options which do not have good amount of liquidity. The buyer pays a fee called a premium for this right. Both premiums would not be same.

Upper Saddle River, New Jersey Articles needing additional references from October All articles needing additional references. Also, adding to what Nik says, you may want to consider writing options when there lesser number of days to expiry as you can take the advantage of an accelarated time decay.