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.

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.

Most Popular

Market crash: have we hit bottom or is there worse to come?
Stockmarkets

Market crash: have we hit bottom or is there worse to come?

For a little while, markets looked like they were about to embark on a full-on crash. And that could still happen, says Dominic Frisby. Today, he look…
27 Jun 2022
Interest rates are rising, here are the best savings accounts on the market
Savings

Interest rates are rising, here are the best savings accounts on the market

With inflation at more than 9%, your savings are not going to keep pace with the rising cost of living. But you can at least slow the rate at which yo…
24 Jun 2022
Why a recession will do us good
UK Economy

Why a recession will do us good

A period of slimming down is always painful, but it leaves us healthier for the long run, says Matthew Lynn.
26 Jun 2022