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.

Advertisement - Article continues below

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.





A bond is a type of IOU issued by a government, local authority or company to raise money.
19 May 2020

Quantitative investing

Quantitative investing uses sophisticated computer-based mathematical models to identify and carry out trades.
8 May 2020

Quantitative easing (QE)

Quantitative easing (QE) involves electronically expanding a central bank's balance sheet.
8 May 2020

Emerging markets

An emerging market is an economy that is becoming wealthier and more advanced, but is not yet classed as "developed".
24 Jan 2020

Most Popular

EU Economy

Here’s why investors should care about the EU’s plan to tackle Covid-19

The EU's €750bn rescue package makes a break-up of the eurozone much less likely. John Stepek explains why the scheme is such a big deal, and what it …
28 May 2020
Industrial metals

Governments’ money-printing mania bodes well for base metals

Money is being printed like there is no tomorrow. Much of it will be used to pay for infrastructure projects – and that will be good for metals, says …
27 May 2020

As full lockdown ends, what are the risks for investors?

In the UK and elsewhere, people are gradually being let off the leash as the lockdown begins to end. John Stepek looks at what risks remain for invest…
29 May 2020