What are options & how do they work?

Options offer alternative strategies for investors to profit from trading underlying securities. There are advanced strategies like the butterfly and Christmas tree that involve different combinations of options contracts. Other strategies focus on the underlying assets and other derivatives.

What is a put option?

With a put option , the buyer acquires the right to sell the underlying asset in the future at the predetermined price. Options trading may sound risky or complex for beginner investors, and so they often stay away. Some basic strategies using options, however, can help a novice investor protect their downside and hedge market risk.

What is a call option?

Options are generally divided into "call" and "put" contracts. With a call option , the buyer of the contract purchases the right to buy the underlying asset in the future at a predetermined price, known as the exercise price or strike price.