The Two Types of Standardized Options Contracts

Since we are only talking about standardized options, we will just call them options from now on.

The two options contracts are a Put option and a Call option.

  • A put gives the owner the right to sell something
  • A call gives the owner the right to buy something

Conversely:

  • A put gives the writer (seller) the obligation to buy something
  • A call gives the writer (seller) the obligation to sell something

If the bullet points above weren’t 100% clear to you, then spend another minute reading through them a few times. These are essential concepts that we will be building on.

The examples in the following section will help put these ideas into a practical context. Many more examples will be given throughout the course. You may feel uncertain about the function of options for a while. Just keep pushing forward. As you see more examples, the concepts will become clearer. Eventually, what was once confusing to you will be second nature.