A call option is a financial derivative giving the buyer of the call option the right, but not the obligation, to buy an agreed quantity of a particular stock (the underlying asset) from the seller of the call option before the expiration date for a fixed price called the strike price. The seller (or “writer”) of the call option is obligated to sell the underlying stock to the buyer of the call option if the buyer executes the option. The buyer pays a fee to the seller (called a premium) to obtain this right.
A put option is a stock market derivative which gives the owner the right, but not the obligation, to sell the underlying stock, at a specified price, called the strike price to the seller of the put. Options are time limited and expire on a predetermined date, known as the expiry or maturity date. Put options are most commonly used in the stock market to either protect against, or profit from the decline of the price of the underlying stock. The buyer of the put option pays a fee to the seller (called a premium) to obtain this right.