Trading Basics
Buying Calls and Puts
The difference between buying calls and puts.
Start here
Buying an option means paying a premium for defined exposure. Your maximum loss is usually the premium plus fees.
1
Buy a call
- Use a call when you think the skin may rise.
- A call has value when the reference price is above the strike.
- Break-even is strike plus premium and fees.
2
Buy a put
- Use a put when you want downside exposure, or when you own the skin and want protection if its reference price falls.
- For inventory holders, a put can help offset part of a drop below the strike while preserving upside in the skin itself.
- A put has value when the reference price is below the strike.
- Break-even is strike minus premium and fees.
3
Main risk
- If the move is not large enough before expiry, the option can expire worthless.