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Options trading can be complex, and the trading jargon may confuse even experienced investors and traders. Two of the most common options contracts to understand are call and put options.
Profits from buying a call. Profits from writing a call. In finance, a call option, often simply labeled a "call", is a contract between the buyer and the seller of the call option to exchange a security at a set price. [1]
Call options rise in price when the underlying stock rises in price, and this basic option strategy gives the call owner the ability to profit with unlimited upside for the duration of the option ...
One well-known strategy is the covered call, in which a trader buys a stock (or holds a previously purchased stock position), and sells a call. (This can be contrasted with a naked call. See also naked put.) If the stock price rises above the exercise price, the call will be exercised and the trader will get a fixed profit.
The trader may also forecast how high the stock price may go and the time frame in which the rally may occur in order to select the optimum trading strategy for buying a bullish option. The most bullish of options trading strategies, used by most options traders, is simply buying a call option.
A call option gives you the right, but not the obligation, to purchase a stock at a set price by a set date. On the other hand, put options give you the right to sell a stock at a specific price ...
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