Hi, can you explain in Layman’s terms when you use call up and put down? Is it only when its a combination option? Thank You
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Hi @t0915, are you referring to when the holder profits from options?
Calls allow the holder to buy at the strike price, so when the market goes up, the investor profits.
Puts allow the holder to sell at the strike price, so when the market goes down, the investor profits.
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Totally agree with @Justin’s post. I’ll add just a bit more:
Calls are exercised when the market price rises above the strike price (call up)
- This is good for the holder/long side (they want to exercise the option)
- This is bad for the writer/short side (they want the option to expire)
If you haven’t watched it already, you should check this intrinsic video for calls video in this chapter (it’s at the bottom).
Puts are exercised when the market price falls below the strike price (put down)
- This is good for the holder/long side (they want to exercise the option)
- This is bad for the writer/short side (they want the option to expire)
If you haven’t watched it already, you should check this intrinsic video for puts video in this chapter (it’s at the bottom).
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Thank you Both!!! I get it now.
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