Option are the financial derivative instrument , that gives you a right but not the obligation to buy or sell an Underlying Asset at specified price on fixed future date.
Mainly there are two types of option contract are there
Call Option : Call option gives you a right to but an Asset , an individual buy a call option with the expectation of the prices of asset will increase on future date. hence the premium of call option contract will also increase.
Put Option : Put option gives you a right to sell an underlying asset, an individual buy a put option with the expectation of the price of asset will decrease on future date. hence the premium of put option contract will increase.
Now comes to your question:
Buying a call Option : If you are Buying a call option means the price of underlying asset will increase, here you have expectation that market would be bullish on future date , hence can exercise the contract at stirke price and can sell it at higher rate on or before the expiry.
Buying a put option : Buying a put option means the price of underlying asset would decrease hence you are buying a put option (Right to Sell) in put option the more the price of underlying asset would decrease , the premium of put option increase, hence can buy at lower rate and can sell it at higher rate.
Selling a Call Option : Here you have expectation that price of underlying asset will decrease. hence the put option premium will increase and call option premium would decrease. here you are working in a opposite trend by selling a call option at higher rate and buying a call option at lower rate . the difference would be your profit.
Selling a Put Option : Here you have expectation that price of underlying asset will increase hence put option premium will decrease and call option premium will increase. here you can sell put option at higher rate and can buy it at lower rate the difference would be your profit.
In Selling call option or put option risk is high as compare to buying a call option and put option, Because buying a option means There is chances of unlimited profit and limited loss
while in selling a option may have unlimited losses and limited profit.
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