Calls and Puts, Both Sides of Each
There are only two kinds of options — calls and puts — but each has a buyer and a seller, which gives you four seats at the table. Most beginners learn two of the seats and get surprised by the other two. Let's learn all four at once, because every strategy you'll ever meet is just some combination of these seats.
Buy a call and you own the right to buy 100 shares at the strike price before expiration. You'd want that right when you think the stock is going up: lock in today's deal price, profit if the stock climbs past it.
Buy a put and you own the right to sell 100 shares at the strike. You'd want that when you think the stock is going down — or when you own the shares and want a guaranteed exit price, like insurance on a house you're keeping.
The seller of a call collects the premium and, in exchange, promises to sell 100 shares at the strike if the buyer exercises. Done against shares you already own, this is the classic income play we'll cover in Unit 2. Done without the shares — 'naked' — it's one of the most dangerous trades in the market, because a stock can rise without limit.
The seller of a put collects the premium and promises to buy 100 shares at the strike if assigned. Backed by cash you set aside on purpose, it's a disciplined way to get paid while waiting for your price. Unbacked, it's a promise you might not be able to keep.
Here's the asymmetry that rules everything: an option buyer can never lose more than what they paid. An option seller keeps the premium but carries the obligation — which can cost far more than they collected. Neither side is 'better.' They're different jobs, and this school will teach you when each job makes sense.
Four seats: call buyer, call seller, put buyer, put seller. Every strategy with an exotic name — spreads, collars, condors — is just two or more of these seats held at the same time. You now speak the language.
Not financial advice · Educational only