How To Guide For: Options Basics And How They Work

Safi Bello
Dec 6, 2016
1 min read

An option is a standardized contract which gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on a specified date, depending on the form of the option. There are two types of options: calls and puts. You can buy or sell either type. If you buy an option you are the holder of the contract and considered to be 'long", while if you sell an option you are the "writer" of the contract and considered to be "short." The buyer of a call has the right to buy the underlying security (example 100 shares of Apple) at the strike price on or before the expiration date. The seller of a call has the obligation to sell the shares, if asked. The buyer of a put has the right to sell the underlying security (example 100 shares of Apple) at the strike price on or before the expiration date. The seller of a put has the obligation to buy the shares, if asked. To get more information on options basics and how they work click on the pictures below to read the articles.