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Options - Call and Put

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Definition:

Options trading uses several related phrases that are unique to options markets. Some commonly used, but often misunderstood options phrases are:

Call

A Call is an options contract that gives the buyer the right to exercise the option and buy the underlying commodity at the strike price on (European style options) or at any time up to (US style options) the expiration date.

An options trader can be long a Call, in which case they have bought a Call contract, and have the right of exercise described above. Or a trader can be short a Call, in which case they have sold a Call contract, and may be required to sell the underlying commodity if they are chosen by the exchange (or options clearing system) to complete their contract obligations.

Put

A Put is an options contract that gives the buyer the right to sell the underlying commodity at the strike price on (European style options) or at any time up to (US style options) the expiration date.

An options trader can be long a Put, in which case they have bought a Put contract, and have the right of exercise described above. Or a trader can be short a Put, in which case they have sold a Put contract, and may be required to buy the underlying commodity if they are chosen by the exchange (or options clearing system) to complete their contract obligations.

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