Options Are Rights, Not Promises
Explain the right-and-obligation structure of calls and puts without confusing buyer and seller risk.
A contract side is a risk side. Pause on the contract type A call is about the right to buy. A put is about the right to sell. Do not move to price, Greeks, or strategy until you can say that sentence cleanly. Name the side Long means you bought the option and paid the premium. Short means you sold the option and accepted an obligation. The same contract can be conservative or dangerous depending on which side you are on. Convert the quote Most listed equity option quotes are per share, while one standard contract represents 100 shares. A…
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