| Lesson 2- Types of Options |
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There are two types of equity options: call options and put options. Both types can be bought and sold by investors. When an investor buys a contract, they are considered to be long that contract. When an investor sells a contract, they are considered to be short that contract. The definitions are as follows: Long Call Option:the buyer of a call option has the right, but not the obligation, to purchase the underlying stock at a set price before an agreed upon date. Long Put Optionthe buyer of a put option has the right, but not the obligation, to sell the underlying stock at a set price before an agreed upon date. While that covers the buying side of options, we must also cover the selling side: Short Call Optionthe seller of a call option sells another party the right to buy the underlying stock from the seller at a set price before an agreed upon date. Short Put Option:the seller of a put option sells another party the right to sell the underlying stock to the seller at a set price before an agreed upon date.
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