Glossary

Puts and calls

A 'put' give you the right to sell a share at a pre-determined price, a 'call' gives you the right to buy them.

Puts and calls are both types of share options. A put gives you the right (but not the obligation) to sell something, say a share, at a set price (the strike price) on a set date in the future.

How much you pay for that right is referred to as the premium, and is deducted from your profit on the sell date. Investors typically buy a put on a share if they expect the price to fall, but do not want to take the risk of actually short-selling the shares.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Where puts give you the right to sell at a pre-determined price, a call gives you the right (but not the obligation) to buy them. So you buy a call with a certain strike price if you expect the price of the underlying share to rise above the fixed strike price, effectively getting the shares at a discount.

Advertisement

Most Popular

Visit/520478/central-banks-what-really-matters-for-markets-in-2020
Stock markets

Here’s what really matters for markets in 2020

The current geopolitical turmoil is making headlines. But it isn’t particularly significant for investors, says John Stepek. What matters more is how …
10 Jan 2020
Visit/520406/mindfulness-and-wellbeing-the-relentless-creepy-rise-of-the-enforced-happiness-industry
Investments

Mindfulness and wellbeing: the relentless, creepy rise of the enforced happiness industry

The evidence suggests we’ve never been richer or healthier, yet we are always being told how stressed and discontented we are. Jonathan Compton assess…
9 Jan 2020
Visit/520422/the-state-of-irans-feeble-economy
Economy

A look at the state of Iran’s feeble economy

The Islamic Republic is a big player in regional geopolitics, but its economy is weak, its people in revolt and its enemies growing bolder. Simon Wils…
11 Jan 2020
Visit/520113/uk-property-prices-are-in-the-doldrums
Property

UK property prices are in the doldrums

House prices barely rose in 2019. Good news, says Nicole Garcia Merida.
9 Jan 2020