Options markets are slightly more complicated than most markets, because they are divided into two different types (calls and puts). With most markets, the only possible trades are to be long or short the market. With options markets, being long an option may be the equivalent of being short the underlying market (stock index, currency, individual stock, etc.), and vice versa. Understanding which options trades are long and which options trades are short is vital to being able to trade options successfully.
Options Trades
The following options trades explain which trades are long and which trades are short, with reference to both the options market itself, and the underlying market. The options trades also indicate whether money is paid or received for the options, but this has no effect on whether the trade itself is long or short.
Long Call
- Pay/Receive Money - Pay money for the option
- Options Market - Long the options market
- Underlying Equivalent - Long the underlying market
Long Put
- Pay/Receive Money - Pay money for the option
- Options Market - Long the options market
- Underlying Equivalent - Short the underlying market
Short Call
- Pay/Receive Money - Receive money for the option
- Options Market - Short the options market
- Underlying Equivalent - Short the underlying market
Short Put
- Pay/Receive Money - Receive money for the option
- Options Market - Short the options market
- Underlying Equivalent - Long the underlying market
