Tech
Entertainment
U.S. & World
Tech
Entertainment
U.S. & World

What are Call and Put Contracts?

By on March 13, 2013

Contracts on the stock market

A call contract and a put contract are the basic securities that make up the realm of stock options. In this article we will describe just what they are.

Call option

A call option is a contract guaranteeing you a certain price (also known as the strike price) for a stock from now until a further date (the expiration date). Example, you buy a January 2014 Google (GOOG) call with a strike price of $700. What this means is that from now until January 2014 you can buy 100 shares of Google for $700 each.

Put option

A put option is very similar to a call option except for the fact that the strike price represents a guaranteed price that you can sell $100 shares at. Example, I own 100 shares of Apple and want to protect my investment if it trades below $400. I purchase the January 2014 $400 put contract. What this means is that if Apple falls below $400 I can still sell my 100 shares at $400 from know until expiration on January 2014.

Comments

comments