Call put trading is one of the most popular options in the stock market. Generally, the option contract that offers the buyer the right to implement the option and purchase the primary commodity at the strike rate within the time limit or before the expiration of the time is named as Call option. In the case of buying a call contract by the trader it?s said to be long a call One the other hand, the can be said to be sort if the trader sell the call contract to other. In this case the trader has to sell the primary commodity as the completion of their contract obligation to the exchange. One the other hand, the option contract that offers the trader to sell the primary commodity at the strike rate within the time limit is named as Put option. In the case of long a put the trader purchase the put contract and in the case of sort a put the trader sell the put contract to fulfill the obligation of the contract.


Call put trading facilitates the traders to operate their business more smoothly and fortify their business safety as well. Call option facilitates its owner with the right to purchase 100 units of share of a corporation at the agreed rate within the time limit. In case of rise in the stock rate the call option price will be go high and vice versa as well. Put is another most attractive feature of the call put trading. It?s a kind of option that offers you the right to sell the 100 units of the share at an agreed rate within the time limit. In the Call put trading the call option buyer always wish the rate of the stock to go high and on the other hand, the put option buyer want to utilize the opportunity of the down fall of the stock rate. The thing is totally reverse of these in case of the seller of both of the options.

The main drawback of the call put trading is that the change in the stock rate has to be happen within the certain period of time otherwise all will go in vain. As a stock holder it may possible to hold the stock for a long time by predicting the prospect of the stock. But in the case of an option holder it?s quite impossible. Its very possible for us to be efficient in the stock business if we study about the call put trading thoroughly.

Covered Calls is a name for an option strategy that is flexible enough so that it can be adapted to different market conditions. It is important that you first decide what type of covered call strategy best fits your personal risk profile. Is your focus simply earning extra income on stocks you already own, or protecting the value of your shares? What you are about to read will show you how.


A Stock Owner Who Wants More Than Just Dividend Income

If this is you, then you're a long term stock holder. You've probably purchased a stock some time ago and hopefully, it's worth more today than when you bought it. Perhaps you have an IRA or superannuation fund and would like to see a greater return on investment? Or maybe you just believe this stock is a good long term investment and want more?

In that case, you need to be aware of a few things. When you sell call options, in return for the premium you receive, you're exposing yourself to the risk of the stock being called away from you - i.e. you may have to sell it at the agreed 'strike price' for the options you have sold. If you've held the stock for a while, there may be capital gains tax implications to consider. You would want to ensure your strike price is greater than the price you originally bought the stock for, otherwise you could make a capital loss. So your decision to implement this covered call strategy will depend on where your stock is today, in relation to when you purchased it.

If today's price is above your purchase price, then this covered call strategy could be a nice way to bring extra income over dividends. The best strategy here, would be to sell call options for the next month out. The reason for this, is that during the last 30 days of an option contract's life, the "time value" in out-of-the-money options declines at an exponential rate. So if you sell call options at a strike price of say, $2.50 above the current market price and within the next month, the underlying stock either goes nowhere, or declines, you get to keep the option premium, or buy it back (to protect yourself from an unexpected price rise) within a few days of expiry, for next to nothing. You have a made a profit from selling high and buying back low, or letting it expire worthless, as the case may be.

You may not be able to do this every month if you want to keep your stock. It will depend on where the current market price is in relation to your original purchase price. You may be prepared to let the stock go, if called away, providing it is above your purchase price. That's your decision. Either way, your one simple fundamental rule if you're an investor and not a trader, is to wait until you can sell call options at a strike price above your original purchase price. That way, you can't lose.

Another use of covered calls for the stock owner, is to provide a form of insurance over your shares. Let's say you own 500 XYZ shares which you purchased for $15 a year ago and the current market price is now $20. You want to hedge your investment in the event of XYZ falling back to $15 or less. So you sell 5 "deep-in-the-money" near month call option contracts on XYZ at a strike price of $15 and receive $5.50 x 500 in premium = $2,750 credited to your account. At the same time, you purchase 5 near month "out-of-the-money" $15 put option contracts on the share and pay $0.25 x 500 = $125. Your net income is now $2,625 less brokerage.

Should the share price fall below $15 before expiry, your put options allow you to sell them for that price, thus protecting you from a catastrophic collapse due to some bad news. You have covered the cost of these put options with the extra $0.50 above the intrinsic value in the $5 ITM call options. If the share price is close to $15 near expiry date and you are nervous about further falls, you may wish to consider selling the next month out deep-in-the-money call options and purchasing OTM put options at the same strike price of say $12.50. Again, you should receive enough premium from the 'deep ITM' call options to cover the cost of the put options plus any potential further capital loss on falling share prices.

The downside of this covered call strategy, is that since you have written deep ITM call contracts, if the stock price is above $15 at expiry date, you are likely going to be called to sell your shares at $15. But you have already received the extra $5 in premium earlier so there is no loss. But if the current market value of the shares has risen to say $24 by now, you have foregone the potential gain on the shares you would have otherwise made. But it's a great choice in a bear market or at what you believe to be the top of an uptrend.

Call and Put trading options are two kind of option agreement. Generally, most people confused by these two options. These two options work on same principal but they are quite different. As a perfect broker you should not make such mistake because call and put tradingin very important for you.


call and put trading. are very important tools for brokers because these let them to limit the risks of playing the stock market, including with some other financial products such as futures and stocks. The first things you have to consider is that how the market works and then find a suitable trading method. Not only that but also you have to use it effectively. For this you have to understand call and put trading options very carefully. You have to consider what option is? And what is not.

Many people have wrong idea about put trading option and they think put option is trade something in the future. It is not this but a futures contract. You are purchasing a commodity a definite charge in the future. As a manufacturer you are assured that you can purchase the product that you need. One the other hand if you are an investor then you buy with the intension that the charge is going to rise and you can trade in future for benefit. So, put trading option is very impotent

A call trading is the option to buy the fundamental stock at a fixed price by a fixed date (the expiry). The consumer of a call can buy shares at a beat price until expiry. The writer of the call (actually the seller) is with that obligation. If the consumer decides to buy then the call writer is obliged to sell the shares to the buyer at a fixed price.

The actual difference between the call and put trading. is that you are buying nothing but right of selling and buying at a definite price in the future.

You may have confusion at this. Actually is little hard to grasp at first time. Imagine you want to buy a apartment building in the town. You didn?t able to sell your current house but you decide to buy the apartment in this year. So at this time you decide to make a conversation with the apartment owner and offer him the price of the apartment house with 20% on the top of that. You promise that you will pay in the next year and give him a deposit.

In this case you are purchasing an option and it is call trading option. You can purchase or not after a certain time period. One the other hand the owner is obliged to sell the house at the fixed price.