Calls and Puts
Chapters in this video
- 0:00 The one word that defines every option contract
- 0:56 Long and short: buyer has rights, seller has obligations
- 2:27 Calls as bullish reservations to buy
- 3:27 Puts as bearish downside insurance with a zero floor
- 4:24 Long put vs. short call: same outlook, different risk
- 5:46 Four-position comparison table
- 6:22 Rapid-fire exam recap
What this video covers
- Why an option buyer (holder) pays the premium for rights, while the seller (writer) receives the premium and takes on obligations
- How to identify any option position as bullish or bearish, starting with whether it is a call (right to buy) or a put (right to sell)
- Why long always means buyer and short always means seller, regardless of whether the contract is a call or a put
- The maximum gain and maximum loss formulas for all four basic positions: long call, short call, long put, and short put
- Why a long put and a short call are both bearish but carry completely different risk profiles (limited vs. potentially unlimited loss)
- Why the short put's max loss is capped at strike price minus premium, because a stock can only fall to $0, not below
- How to spot exam traps that swap buyer/holder rights with seller/writer obligations, or that confuse capped short-put risk with unlimited short-call risk
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